00:00:00
so every business from the smallest startup to the largest corporation in the world has five fundamental Parts if
00:00:07
you want to create a business or interviewing for your first job or interviewing for your first big
00:00:13
promotion understanding this is a superpower it's so exciting and fun Josh
00:00:18
Kaufman the world famous business Expert entrepreneur and best-selling author
00:00:23
Renown for his practical approach to mastering business productivity and Rapid skill acquisition this is the
00:00:30
foundation of every business plan that has or ever will exist so Step One is
00:00:36
value creation find those important unmet needs and then focus on meeting those is this enough of a problem for
00:00:43
you to pay money to solve it how do you find out if there's a big enough market for your idea the easiest best thing to
00:00:49
do is just step two then marketing and humans have five drives the drive to acquire to bond to learn to feel to
00:00:57
defend and the more drives that you hook into the more attractive the business offer is going to be so what is step
00:01:03
three the third part of every business is the fourth part is particularly important which is and the fifth part is
00:01:10
what a lot of people struggle with but I'm here to help you so the fifth part is Josh The Narrative out in the market
00:01:17
is you have to do 10,000 hours to learn anything you're telling me it's actually 20 hours is the key yes or 40 minutes a
00:01:22
day for about a month so how do I do that then the best way to approach this is to start with that's the secret
00:01:31
congratulations Dio gang we've made some progress 63% of you that listen to this podcast regularly don't subscribe which
00:01:38
is down from 69% our goal is 50% so if you've ever
00:01:44
liked any of the videos we've posted if you like this channel can you do me a quick favor and hit the Subscribe button it helps this channel more than you know
00:01:51
and the bigger the channel gets as you've seen the bigger the guest get thank you and enjoy this episode
00:01:57
[Music] Josh why why why did you write a book
00:02:05
called the personal MBA it's a world class Business book that sold almost a million copies so far it's a real iconic
00:02:11
book in the category but why why did you feel compelled to write that book because I can tell by the thickness of
00:02:17
it it took you a long time it did so there must have been some sort of personal motivation that was pretty
00:02:23
strong to write that book sure uh a couple of things um curiosity
00:02:30
and persistence and I was solving my own problem um so one of the things that
00:02:36
that happened is right after school I got a job at a big company and I was working with a lot of people who had
00:02:42
just graduated from top 15 business programs um I got this job straight out
00:02:47
of undergrad I had no idea what I was doing and I really wanted to learn like
00:02:54
what what are what are we doing here what is what is business how does it work what's important to know what
00:03:00
what's not important to know and so one of the things that I tried to do with the personal MBA um and and one of the
00:03:07
the reasons like how the project got started was I figured that there was
00:03:13
there was a book written by a business school professor in the 1950s or
00:03:18
something and I just needed to go out and find that book and read that book and then I would understand the
00:03:25
fundamentals then I would understand the basics of of what it is that that we're all doing here
00:03:30
and I looked and I looked and I read and I read and I I couldn't find it and so
00:03:35
at a certain point that I had essentially spent months reading just going through
00:03:42
category after category just trying to understand for myself what businesses are how businesses work and at a certain
00:03:49
point I realized like this is important to me and there's something that should
00:03:55
exist in the world that for some reason doesn't exist in the world and I think I need to be the person to make that to do
00:04:03
that and so that's when the personal MBA be went from just this crazy side
00:04:09
project that I that I did post undergrad into essentially a second full-time time
00:04:15
job reading and research and and trying to to decide for myself what are the
00:04:21
critical parts of business how do businesses work how do they function and
00:04:27
then I decided to put that in a form that other people people could read and benefit from as well what is an MBA
00:04:34
master of Business Administration it's big big degree um actually one of the
00:04:39
most economically uh successful academic degrees that exist um over the past
00:04:47
several decades uh growth in uh business masters programs worldwide has has just
00:04:53
exploded and so for better or worse when adults decide that their interest
00:05:00
in business the first thing they do is go to Google or Amazon and they type in
00:05:06
the letters MBA and they start looking for graduate business school school
00:05:12
programs and I think that's a mistake I think there's there's a reason that
00:05:20
people want to learn business there's a reason that people um find this area of
00:05:25
of knowledge useful and I don't necessarily think Academia is the the place to start I think there's an
00:05:31
enormous amount of business knowledge and skill that you can develop on your own um by understanding the most
00:05:38
important Concepts around what businesses are and how they work and
00:05:44
using them in your day-to-day life using it in the career that you already have using it to start something new on your
00:05:50
own and just a a few very simple straightforward ideas go a very long way
00:05:56
and so my goal in writing the Pumba was to explain business to someone who has no
00:06:03
knowledge no experience no idea what's going on start from absolute Square zero
00:06:11
and explain all of the different parts of a business how they work how they interrelate to each other and so you can
00:06:16
take that knowledge and do good work whatever it is that that you do in your life or in your career when you say do
00:06:23
good work we're talking about an outcome there what kind of outcomes do you think if someone's just clicked on this conversation now and we you know with
00:06:30
the knowledge that we're going to talk about this as many as well as other things what do you think the outcome for
00:06:36
them could be if they got access to the information that you put in this book the personal MBA but also from listening
00:06:42
to this conversation sure uh so many of of the readers of the personal MBA over
00:06:48
the years um our early career professionals are just getting started in their career in some way shape or
00:06:53
form and I can't tell you the number of times that that I've heard from someone who's like I'm interviewing for my first
00:06:59
job or I am interviewing for my first big promotion um I actually have a
00:07:05
friend who is who was in this position uh a couple months ago she's like I'm a
00:07:10
skilled professional I've been working for a while there's an opportunity to move into management here and part of
00:07:18
that interview is going to be they're going to ask me like how how do we improve the business that we're in she's
00:07:25
like I'm trained as an engineer I don't know about any of the this business stuff and so there's a very simple way
00:07:33
of understanding what a business is what a business does the primary parts that
00:07:39
every single business has and and how those processes interrelate and what that knowledge gets
00:07:46
you is the ability to take a look at any existing business and understand it in a
00:07:52
very deep and fundamental way so you can take a complex organization you can
00:07:57
break it down into parts that are very simple straightforward easy to
00:08:02
understand and then you can take that knowledge to ask a series of very useful
00:08:08
questions how is this business creating value how do they attract the attention of people who might want or need what
00:08:15
this business provides how do they convince people to pull out their wallet or checkbook or credit card um and and
00:08:21
give the business money how does the business deliver the value that it it promising to its paying customers and
00:08:28
then is the business bringing in money how's the business spending money and a is it bringing in more than it spending
00:08:35
if not there's a problem um and more importantly is it enough is it enough to
00:08:42
make all of the time and energy and effort that's being put into the business by the owner and the employees
00:08:48
worthwhile and that's the essence of finance and so understanding business in
00:08:54
this very systematic way is a superpower it it allows you to take a look at
00:09:01
anything like the businesses that are happening in the world all around us it helps you understand them if you want to
00:09:07
create a business this is the foundation of every business plan that has or ever
00:09:13
will exist because each of these parts is universal essential and fundamental
00:09:20
you have to answer these questions and so by having this framework in your head um going back to my friend earlier her
00:09:28
prep for the interview was very simple we had a 15minute conversation about what those things might look like she
00:09:34
went away and did her prep and she went into the interview the next day and she was offered the job and one of the
00:09:41
things that comes out of having this deep understanding of business even for potentially very young or very Junior
00:09:49
people who are just getting started understanding these things being
00:09:55
able to ask these questions being able to know what's important and what's not and think like an owner or an operator
00:10:02
of the business is what the owners and operators and Executives and managers
00:10:09
are looking for in terms of people to hire people to recruit or people to
00:10:14
start companies and so the more you understand how all of this works at a deeply fundamental level the more
00:10:21
opportunities you're going to have I think it's I think it's a skill That's essential for every person to to know
00:10:27
and and be conversent I think from the stats you said about how the desire to sign up to a academic
00:10:36
MBA have increased most people would agree true because you know that's a reflection of demand in the market
00:10:43
you're saying more and more people are going to University and trying to do a business course are they being scammed because if
00:10:51
you think about the promise they're signing up to even through the lens that you've just described they're being
00:10:57
marketed something sure is that institution delivering the value that they're being marketed I.E I guess the
00:11:04
the promise is that you'll have a better career you'll earn more money if I go to university and do a business degree is
00:11:10
that being delivered the answer to that is it depends and the it depends is it depends
00:11:16
on what you want for yourself and your life and so um approximately 2third of
00:11:24
business school graduates um go into either management consulting or Investment
00:11:30
Banking um the remainder of them the vast majority go into working for extremely large companies and so if you
00:11:39
want your life to look like that then the promise that is is very often
00:11:45
delivered but with business business school programs is you're essentially buying yourself a very expensive
00:11:51
interview to have an opportunity at a company or a firm or an industry where
00:11:56
that is the primary mode of of um um of getting into it
00:12:02
now the price of that interview can be very very Steep and so um the the top 10
00:12:10
Business Schools um as we're talking right now charge anywhere between $240
00:12:15
and $250,000 for a two-year program that's an enormous amount of
00:12:21
money and that's usually financed with debt and so if you don't have a a for example if you're not working for a
00:12:28
company that is willing to sponsor your way through and pay the tuition costs most of these degrees are are financed
00:12:34
with debt and that debt is going to be with you regardless of whether or not
00:12:40
you like your career regardless of the the economic situation
00:12:47
that you you graduate into regardless whether or not you get a job at at the end of it
00:12:53
so you're taking on an enormous OB an enormous obligation spending a lot of
00:12:59
money borrowing a lot of money with a very unsure outcome at the end is there
00:13:05
any correlation between getting an MBA and long-term Career Success uh it it's funny uh this has been asked by very
00:13:13
many people and the answer is always no um so my my two favorite studies here um
00:13:19
Jeffrey feffer and Christina Fong at Stanford University at the time this was the early 2000s business school
00:13:25
professors did a study of do business school programs work because if they did
00:13:32
you would expect to see more successful Executives professionals having business school
00:13:38
degrees and what they found is no it makes absolutely no difference and my my
00:13:45
favorite quote um was was by the lead offer um Jeffrey feffer was like if you
00:13:51
are good enough to get in you are good enough to do well regardless it's a credentialing system
00:13:58
it's it's a pre selection um but really like the people who make things happen
00:14:03
in business are people individuals with skills and abilities and the abil the
00:14:10
the the Curiosity and the drive to to make things happen you don't necessarily get that from having three letters after
00:14:17
the end of your name there's going to be so many people that are listening that want to start their own businesses they're probably currently in a
00:14:23
corporate job right now and they're thinking gosh I have this idea I'd love to give it a go but something is holding
00:14:29
them in place and from reading your book it's it's the first thing that tends to hold people in place is just their
00:14:34
belief that business is complicated yeah um from everything you've come to learn and all the testimonials you've had do
00:14:41
you agree with that belief that business is complicated and or how difficult do you think it is for the average person with an idea to go from working in a job
00:14:49
to earning I don't know $10,000 a month running their own business do you think that's achievable for most people I
00:14:55
think it is achievable for most people yeah and I I think uh um I think business is complex in the sense of
00:15:03
there are many moving Parts it's not just one thing they're interr relatednesses that you need to
00:15:09
understand it's not complicated in the sense of the most important ideas
00:15:16
principles things to do things to understand are not all that difficult when it get gets down to it um I think
00:15:23
in business in general um somewhat for status related reasons but business
00:15:29
people like to feel fancy and complicated and and sometimes you signal status or sophistication by making
00:15:35
things sound really big or difficult or or complex I think that's fundamentally
00:15:41
not the case for business most of the ideas that we deal with are common sense
00:15:47
and simple arithmetic and so we do need to Grapple with the
00:15:52
complexities of the world because as we were talking earlier the every business
00:15:58
has these five major interrelated parts we need to understand how those work um
00:16:03
businesses are created by people for the benefit of other people and so we need to understand human psychology both our
00:16:11
psychology and the psychology of the people we inter interact with relate to
00:16:17
whether that's customers or employees contractors the other people in our
00:16:22
world and then there are certain parts about how the world Works system and
00:16:27
process how things tend to interact with each other that's very valuable and
00:16:33
important to know um but again complex not complicated and I
00:16:41
think there's there's a lot of for for the person who wants to start a new business a lot of it comes
00:16:49
down to answering those fundamental questions how are you going to create value that someone else in the world
00:16:55
wants or needs okay so let's start so typically when I do these podcasts I I try and navigate The Journey right I try
00:17:02
and figure out where to start but this is going to be the first time I actually ask you if I am that person who has an idea in my head um or maybe I've got you
00:17:09
know I'm off to the races with an idea I've got a I don't know I'm going to launch a business that sells
00:17:17
candles okay sure I think I can make candles that smell amazing so what's the
00:17:23
first of those sort of levers or principles I need to think about when I'm when I'm designing my business
00:17:29
thinking about my business you know thinking about making a business plan what is step one in that Journey yeah
00:17:35
Step One is is the value creation component which is it it sounds like in in this particular example the candles
00:17:41
are the the type of value that that would be created and then the the relevant question there
00:17:48
is why do people buy candles what are they looking for when when somebody goes
00:17:54
goes out and they say you know what I would really like to have a candle right now
00:17:59
what do they want what do they need what are they looking for they want them to smell nice exactly okay so perfect they
00:18:06
want them to look nice yeah um they want them to not be a ripoff so they want
00:18:11
them to be cheap guessing they want them to last a long time I guess sure y last
00:18:18
a long time okay and so this is a a really interesting thing a lot of the things around value creation comes come
00:18:25
down to making trade-offs between competing priorities and so the perfect product or the perfect
00:18:32
offering would deliver every single thing that the the customer would like and it would be free yeah and so a lot
00:18:40
of the the early stage value creation process is like okay we've identified some some areas like things that people
00:18:47
are looking for things that people want can you understand each of those
00:18:52
things in detail around for example what makes a really good candle set what makes a candle last longer what allow
00:18:59
Kingdom manufacturing at at a relatively inexpensive rate all of those things and
00:19:04
then most successful businesses pick one or two of those things to focus on and then turn that dial all the way up to 9
00:19:13
10 11 and so for example you might be able to make the best smelling longest
00:19:19
lasting candle using some complex chemistry manufacturing process whatever mhm that might be very expensive to do
00:19:27
so the price of the candle might be higher than you than you otherwise uh would like it to be um or you could go
00:19:33
the other direction let's make the cheapest most ubiquitous candles ever but then let's focus on the distribution
00:19:39
end of things to have candles in more places and so you start um this was
00:19:45
something that that I learned how to do very early in in my career I worked for
00:19:50
a consumer goods manufacturer big company called Proctor and Gamble who make everything by the way if people
00:19:56
don't know what Pro everything they literally they're probably 10 things in this room that Proctor and Gamble made yeah toothpaste laundry detergent you
00:20:03
know all of that I I worked on the home side and one of the things that I took away was uh every once in a while you'll
00:20:10
you'll read in like the The Wall Street Journal New York Times whatever about the the crazy lengths that consumer
00:20:18
goods researchers will will go to to figure out how people use like paper towels or something like that I got to
00:20:26
be one of those people for a couple years and it was fascinating I've watched so many people
00:20:32
clean their kitchens and there's there's a certain amount of like the value creation
00:20:37
process that that is psychology and anthropology of just going out into the
00:20:42
world with your eyes wide open noticing what people do asking questions noticing
00:20:49
subtle things that they might not even pick pick up on and then if you do more formal
00:20:55
research you can start asking people to to make explicit trade-offs between
00:21:00
options and so if you could have a candle that lasted the long time versus
00:21:07
had the most amazing scent throw ever which one would you pick and you can
00:21:13
start to to kind of navigate the space of possible solutions in that particular category by talking to people who buy
00:21:20
candles because you don't want to ask a random person on the street you want to talk to people who will actually
00:21:25
purchase the things that that uh that you're creating but by paying attention and by asking
00:21:32
questions and starting to to get a feel for how the people who are making these
00:21:37
buying decisions actually navigate the process of narrowing down options to make a decision that's where you find
00:21:45
some sometimes the very tiny things that make an enormous difference that's where
00:21:51
you find the places to innovate right yeah but people don't know what they want right so you got to be careful because if you give people a survey on
00:21:57
candles exactly they might tell you something but they might buy you know there's this sort of
00:22:04
Detachment between what we think we want and how we spend our money totally which can cause people you know because I'm on
00:22:09
Dragon's St so people I'm halfway through filming at the moment so I've had 50 pictures so far and one of the
00:22:15
most popular phrases I hear as a dragon on Dragon s which is the like shark tank in the US and around the world is I have
00:22:22
this idea my friends and my M my mom have told me it's great and they they' definitely buy one and here it is and
00:22:28
and I go that means [ __ ] nothing means absolutely nothing yeah and a lot of people pursue ideas they quit their
00:22:35
career they spend years pursuing this thing that their seven best friends and their mom said they would buy and they
00:22:42
you know they gave it to their their friend and their mom and their friend and mom used it and said they liked it yeah the best way to get around that ask
00:22:49
for early pre-orders ask people to lay down money on the idea so um this I mean
00:22:57
this is part of how Kickstarter started right here's an idea here's a concept
00:23:02
here's exactly what you're going to get please enter your credit card details because it's that act it's the raising
00:23:09
your hand wallet checkbook credit card and saying yes I'll take one that's the signal that you're looking forward for
00:23:16
and that can be everything from you know Kickstarter on the consumer side to letters of intent on on the the mid to
00:23:24
large size company side yes if you build this Software System we will sign up for
00:23:31
an engagement at X price for X term um so finding that buy buying signal is
00:23:36
really important and then going back to to your comment earlier about um
00:23:42
noticing the the subtle things people's behavior says a lot more
00:23:49
than people's words and so if you if there's a conflict between what people are saying and what people are doing
00:23:56
focus on what they're doing all the time um one of my favorite uh stories coming
00:24:02
out of the the um consumer research department at Proctor and Gamble was
00:24:07
there was a researcher in in a a lady's home one afternoon and they were just watching her do her laundry this was
00:24:15
this was back in the days of powdered laundry detergent so you know you have the box of powder you have the scoop put
00:24:20
it in and so the uh the lady turned on her her
00:24:27
washer and just stood there for like 15 20 seconds doing nothing just like
00:24:34
waiting and the research just watching and then at a certain point she's
00:24:39
like what what are you doing she's like oh I'm I'm waiting for the tub to fill
00:24:45
up why are you doing that it's like well if there's not water in the bottom when
00:24:51
I put the powdered laundry detergent in it's not it's not going to dissolve properly so you've got to wait for the
00:24:58
tub to fill up a little bit and then then you put the powder in and you swish
00:25:03
it around the the bottom of the Basin with your hand so it dissolves all the way and then you put the clothes
00:25:10
in and so the researcher took this back
00:25:15
to the um to the research department and all the chemists are just like this is dumb we have science we have data that
00:25:23
says no our our detergent dissolves completely this is not this is a
00:25:29
nonissue and the consumer researchers are like no this is a psychological need
00:25:35
there's a bit of reassurance here that people don't have how can we give that
00:25:41
to them and the answer to that was the invention of liquid laundry detergent which is now a multi-billion dollar a
00:25:48
year product category and it didn't come from a physical need it came from an unmet psychological
00:25:54
need and I just love that because I remember remember growing up um watching
00:26:01
my grandmother do laundry and she did the exact same thing for the exact same reasons and it's sometimes those subtle
00:26:10
things so for example going back to our candles um one of the things that uh
00:26:18
just by pure coincidence I was involved in uh when I when I worked at PNG uh was
00:26:23
scent research so the scent of the cleaning product like there's there's a lot of psychology there's a lot of
00:26:29
science um that that goes into that
00:26:34
and there's a difference in how something smells for example when you take a cap off of a bottle of something
00:26:41
and sniff it smells different than if you for example a cleaning product you
00:26:47
pour it into a bucket and dilute it with water and you mop your floor and so those things make an enormous
00:26:55
difference like how is the product going to be used and in the case of candles one of the things that people pay very
00:27:01
close attention to is the smell of a candle while it's burning and the smell of a candle when
00:27:08
it's not burning and there's a whole category of candle purchasers who will buy a candle
00:27:16
based on what's called cold throw how much does it smell when it's just
00:27:21
sitting on the middle of your table not burning not doing anything and so those
00:27:27
are the the little bits like if you pay close enough attention if you focus on the right things the the the subtle
00:27:34
things that people are either saying or not saying you can find those very
00:27:39
important unmet needs and then focus on on meeting those and that's that's the
00:27:45
making of of a a product or an offer that that has likes to it so interesting
00:27:50
because um we all walk around that thing you were saying about the powed laudry deterant that was 100% me I was too
00:27:57
young to be messing around with the washing machine but whenever I had like my shot my parents were out I'd pour all
00:28:02
the powder in into the little tray and then I would like swish it around with my finger I'd get water from the sink
00:28:08
above and pour it in there to try and dissolve the powder with my finger so I was doing that as well and I was thinking as you you you were saying that
00:28:14
you know we all walk around with the same kind of set of psychological biases
00:28:21
so if we assume that we can truly understand how other people are behaving
00:28:29
when we are other people when we are them as well when we have the same sort of psychology assuming that we can guess
00:28:36
that is quite dumb because none of us would have ever guessed what you just said about the laundry detergent thing none of us would have ever sat in a
00:28:42
boardroom and figured that out we had to go out into the world and almost become
00:28:47
like a fly on the wall or take a bird's eye view on how we as humans are behaving to spot that opportunity right
00:28:53
and and I was thinking you know there's so many people that are maybe have business ideas now
00:28:58
um or thinking of a business idea but but there's just just gaping opportunity in observing the world objectively and
00:29:05
seeing how people are doing what they're doing and why they're doing what they're doing um I always wonder that I think you know if you're trying to think of a
00:29:11
new business idea should you sit down with a piece of paper and sketch out the problems that you've had in your life
00:29:17
should you just start to become more aware of your day-to-day life and then make notes in your journal or is there
00:29:23
another way to find that idea yes start there for sure yeah and then go out into the world with
00:29:30
your eyes open just looking for problems annoyances frictions um things that are
00:29:36
just a little bit annoying or suboptimal in some way I mean I I think kind of a
00:29:43
general a general question like we're not humanity is not running out of
00:29:49
problems to solve the there are millions of opportunities to make someone's life
00:29:55
a little bit more pleasant a little bit more secure a little bit bit more interesting a little bit more fun and so
00:30:01
I think there's there's a lot of magic to be had in just going out into the world and having experiences in the
00:30:08
world with other people and just noticing in a way that you've never noticed before of oh there's something
00:30:15
there that's that's a little bit higher friction than it otherwise could be I mean this this was kind of the the Genesis of um like Amazon Amazon Prime
00:30:23
how can we make it as easy as possible for someone to click a button and something magically arrives on your doorstep within 24 to 48 hours how can
00:30:33
we make just just this opportunity a little bit more fun or different or
00:30:39
interesting um this is this is where like um over the past 20 years and consumer goods packaging design has come
00:30:46
come a long way because if you can grab someone's attention and give them a little bit of a pleasant experience while they're they're walking around
00:30:53
shopping that's a good thing it it moves an enormous amount of product and it's
00:30:58
something that you have to plan for from the very beginning stages but it makes a huge difference it's so interesting cuz
00:31:03
I was just thinking as you're saying that I was thinking what is an annoyance or a frustration that I've just I just
00:31:09
live with that I've kind of just assumed is the way of the world and it's just
00:31:14
the way it is and one sprung to mind that's very close to home in every sense of the word we've been doing this
00:31:19
podcast a long time a couple of years now three four years now and every single time before we start the podcast
00:31:26
Jack will walk in and Jack will say to the guest please don't bang on the table because if you bang on the table it comes through the mic we've been saying it for years we
00:31:33
haven't figured out how to solve the problem yet so if there's anybody out there but I was thinking do you know what what an entrepreneur would do um if
00:31:41
there was any in this [ __ ] room um we would we would make our own mic we would solve the problem we could we could
00:31:48
probably solve but we kind of just assume that someone else will solve it or it's just the way of the world and I
00:31:53
say this because we could have probably fixed this we've been very busy but we could have probably
00:31:58
made a new mic with a new Bas that suspends the mic so the vibrations don't go through but I say this because
00:32:04
everybody in their lives has those frustrations absolutely things they're just living with and they they're kind
00:32:09
of assuming that someone else is going to solve it or it's just the way the world is
00:32:14
yeah what's sorry Jack we can't hear you Jack Jack's defending himself from the corner
00:32:20
sure yeah yeah it's difficult with sm7 BS but
00:32:27
uh no there's a company called reot that makes some really amazing universal shock mount adapters for microphone I
00:32:33
think we should I think we should do it and we should sell it we'll have a meeting about that later
00:32:39
are you gon to go get it yeah totally are you gon to go get it oh it's in there
00:32:44
okay no I was thinking God why didn't we just make one okay so Jack tried to make this contraption here oh cool which
00:32:51
would I guess suspend the microphone and limit the vibrations going through it yeah okay but we tried it and it didn't
00:32:57
work now now we're very busy with lots of solving other issues so this was kind of low on the list of priorities but
00:33:03
that as an example and everybody listening to this now has daytoday frustrations things they observe and go
00:33:09
that could be better sure and they go I hope someone else figures that out yes and that's the entrepreneur that's going
00:33:15
to make the millions yeah and and the the difference between um entrepreneurs and non entrepreneurs is the entrepreneur says and I'm going to be
00:33:21
the one that solves that problem and then what happens it depends on the idea so for example like manufacturing idea
00:33:29
like this is this is where we start getting into the different types of businesses whether you're you're
00:33:34
building a product or building a service um some sort of shared resource membership um I I talk about 12
00:33:41
different forms of value in the personal MBA so the instantiation of the idea
00:33:47
really depends on the form of which the you're you're going to deliver it to to
00:33:52
the end result but like a lot of times the early stages are prototyping finding
00:33:59
people who might benefit from this thing getting their input advice perspective
00:34:05
and that gives you the information that you need to either continue going down that path or sometimes the information
00:34:11
is yeah this is a this is something that could potentially be a really good idea
00:34:17
um but is is not going to be a viable business for for whatever reason and so some of those early stages of
00:34:24
Entrepreneurship are very focused on what is this how might it work can we
00:34:31
sketch it out in enough detail to know what questions we need to answer next in order to figure out like what are the
00:34:38
critical assumptions can we meet those critical assumptions to make a viable business if so yes let's move on to the
00:34:44
next up if not let's discard it and go on to the next so when we think about this microphone challenge we've had one
00:34:49
of the critical assumptions we're making is that it can be solved sure is that there's some way to kind of insulate the
00:34:55
microphone from the vibrations of the table at some point as those vibrations travel up and I can see in this quite
00:35:01
cool Contraption actually we've used rubber here yeah assuming that if we suspend it with rubber there I'm
00:35:06
guessing this is Jack's invention I guess it's your or someone else's is it your invention yeah it's a cool idea it now um that's
00:35:14
an assumption we've made I'm guessing it failed it failed yeah I think
00:35:22
the okay yes okay so these are the assumptions you're talking about yes and
00:35:29
and there's also um in this specific example it's something that will serve
00:35:34
the need with this particular microphone and so for example you might be able to solve the problem in a very
00:35:40
straightforward Way by changing to a different microphone that has different options available so a lot of it just
00:35:45
depends on the constraints that you're dealing with and this is the early stages of figuring out how to give value
00:35:51
to the end consumer this is the sort of iterative experimental failure ridden process yes which everyone has to go
00:36:00
through and I think this is important to highlight because what often will happen is people will take the first pop at it
00:36:07
I know we've been doing we've been taking many pops but just for the sake of this conversation they'll take the first pop at it it won't work then
00:36:13
they'll concede uhhuh yep when it's and a lot of it comes down
00:36:19
to how big is this problem how urgent is it how many people need something like
00:36:24
this um so this is where you get into like the you know St this The Standard
00:36:30
supply and demand sort of economic consideration is this a need that only you have or is this a need that many
00:36:36
many people have and how how big of a need is this is this something that for
00:36:42
example um high-profile podcasters will pay thousands of dollars to solve or is
00:36:48
this something that affects only a Subs segment of people and is not valuable
00:36:53
enough to to bother with or to invest a lot of time and energy researching finding a a solution for how do we how
00:36:59
do you find out if there's a big enough market for your idea that's where you that's where you talk to people and that's that's the this is where value
00:37:07
creation and marketing tend to intersect and so it's can you identify people out
00:37:12
in the world who have a very similar problem set of things that
00:37:18
they're think thinking about set of questions that they're trying to answer and the more of those people you can
00:37:23
identify and the more urgent and pressing the need is
00:37:29
um that's the first thing that you need to to look for in terms of of identifying viable markets so they tell
00:37:35
me that they want it I go out there I speak to people they all tell me that they want it but that's not enough right
00:37:41
ask them to place a pre-order that that's that's the step two H okay so
00:37:47
it's it's not the question isn't do you want it is it's is this
00:37:53
enough of a problem for you to pay money to solve it um um there's a a guy desk
00:37:59
trainer who who founded intercom um has a saying I just love
00:38:05
he's like show me a credit card that has been swiped to solve this problem and I
00:38:10
will concede that the problem is real and so you're really looking for like are people is this big enough
00:38:18
important enough are people spending money to solve this particular need if so that's a really great sign you're on
00:38:25
the right track okay so what I'm gonna do then is we're going to before we spend a lot of money in building out
00:38:32
this new microphone system we're going to put up a waiting list for the podcasters we're going to see how many of them swipe to pre-order it yep and
00:38:39
then if we get I don't know a couple of hundred a couple of thousand probably a couple of hundred couple of hundred
00:38:45
swipes with their credit cards to pre-order this thing even though we haven't built it yet then we're going to invest in building it yep does that make
00:38:51
sense it does and then you do a short run to mitigate your risk first okay you get your your uh initial Fe feedback
00:38:57
from your first run of customers they will have opinions about what works and what doesn't mhm and then um if that is
00:39:05
enough that's when you start like start small and then you work up to to larger and larger batches of production because
00:39:11
what's happening a lot out there with aspiring entrepreneurs is they're spending two to three years building
00:39:18
their company and it's all leading up to this launch day where everything's riding on this big launch day they've
00:39:23
raised I don't know $70,000 for their whatever sure why is that the wrong
00:39:28
approach to take I think there's a difference between doing business and playing
00:39:35
business it's like people who get really really excited of I'm going to start a company and so the first thing I need to
00:39:41
do is pick a logo and buy my business cards like that's the signaling parts of business it's playing a role where the
00:39:48
actual doing of the business is the value creation Marketing sales value delivery finance and so the more you can
00:39:55
skip all the early stuff get to the core of what is going to make the business succeed or fail figure that
00:40:03
out as quickly as possible and then get on with it then you're going to have more than enough time and money to have fancy business cards and like do do do
00:40:10
that bit but yeah it really is like at the idea validation stage it's how can
00:40:15
you ask enough people who might be in the market to spend money to solve this
00:40:20
particular problem how can you get something valuable in front of them as quickly as possible what would that look
00:40:27
like and how can you do that particularly early on if you don't have a lot of funding in a way that minimizes
00:40:32
time and finance because the worst possible uh way to go about things is
00:40:39
raise millions of dollars of venture capital and build up out this whole thing only to have no one buy it at the
00:40:47
end you started with this point of value giving value to other people why why is
00:40:53
that the the frame to think through when you're thinking about the idea yeah I
00:41:00
think if you are not providing value to other people in a fundamental way you
00:41:06
have no business um a venture that markets and sells
00:41:14
something that does not deliver value to other people is a scam and so really
00:41:19
like I think there's there's a way of thinking about business this is one of the things I find fascinating about it
00:41:27
business to me is is a generative act you are going out into the world you're
00:41:33
finding a problem you're finding a solution to that problem you're creating something that makes the world better in
00:41:41
some fundamental way and then you're bringing it to the attention of people who care and you're
00:41:47
convincing them that they need to try this to actually solve their problem and then it works and then they give you
00:41:53
money for it it's great so you can just keep that process going going for for as
00:41:58
long as as it makes sense to everyone involved like I I think to me a well
00:42:05
running working business system is a thing of beauty you're solving people's
00:42:11
problems you're being rewarded for it you're doing it in a way that allows you to keep solving people's problems and it
00:42:18
makes your life better in the process I think that's a wonderful way to live your life and if you don't start
00:42:28
by asking the question what is the valuable thing that I am going to deliver to people who care the whole
00:42:34
thing pulls apart what step two then yeah marketing marketing okay marketing
00:42:39
is fun yeah marketing is is just who might be interested in this thing um
00:42:46
and a lot of it is the the the fundamental thing is if no one knows you
00:42:51
exist no one's going to be able to buy your thing and and so marketing is is
00:42:58
the process of attracting the attention of people who might be interested in the value that that you're creating and in
00:43:05
an Ideal World making them curious wanting to learn more um asking for
00:43:11
additional information engaging with what what it is that you have a lot of people conf conflate Marketing in sales
00:43:19
to me they're distinct processes so so marketing is the attracting attention
00:43:24
and generating interest and then sales is the process of convincing someone to buy and then getting them set up as as
00:43:31
as a customer and a lot of marketing comes down
00:43:37
to what is it exactly that you're trying to gather attention for and where do
00:43:42
those people generally hang out what are they curious about what are they already paying attention to what can you um what
00:43:50
can you take advantage of or dovetail into in order to attract someone's attention at the right moment at the
00:43:56
right time and make them aware that you have something that could benefit their life here's what it is here's how you can
00:44:03
benefit from it to be great at marketing do you think we need to understand the underlying psychological sort of core
00:44:09
motivations of humans oh absolutely yeah and you know what those are yeah um
00:44:14
there was a really great book about this um published years ago called um drive
00:44:20
by Paul Lawrence and and noria um who I think at the time was the um the dean of
00:44:26
Harvard Business school and they argued that um humans
00:44:32
have four fundamental drives um and if I can remember them off the top of my head the drive to
00:44:38
acquire the drive to bond the drive to learn and the drive to
00:44:45
defend is there a fifth the drive to feel the drive to feel is is my addition
00:44:50
to to this okay so yeah and to me like so the drive to acquire you know let's
00:44:55
go out and buy products in enhance my career things like that the drive to
00:45:00
learn gather knowledge understand the world um the drive to bond relationships
00:45:06
uh experiences uh the drive to defend uh let's protect myself home security
00:45:12
systems you know all all that thing and for me like entertainment is very much a a drive to
00:45:18
feel um we don't go to the movies to do any of those previous four things we go
00:45:23
to the movies to have an experience to feel motions and so I to me the vast
00:45:31
majority of offers in the market are designed to to to hook into
00:45:38
or to take advantage of one of those five core human drives and the more
00:45:43
drives that you you hook into generally the more attractive the the business
00:45:48
offer is is going to be and so you could make a a a pretty straightforward
00:45:53
argument that um one of the reasons that soci media has become so popular over the last decade is because it hooks into
00:46:02
at least four out of five of these drives potentially all five so give me an example of a business
00:46:08
and the drives that it's kind of playing to in its marketing strategy so if we
00:46:13
think about Nike maybe sure yeah so um the the
00:46:20
drive to acquire is straightforward I need to put things on my feet like shoes are great um also it is status so so I
00:46:28
would say the the there can be like the acquiring status drive there can also be
00:46:34
very much like ingroup outgroup Dynamics are a form of bonding right I'm the type of person who identify or who will wear
00:46:42
this sort of thing I form relationships with people who care about these sneakers these special additions these
00:46:50
athletes these whatever um less learning less defending
00:46:57
feeling can very much be a part of of a product experience like people who strongly identify with certain brands
00:47:04
certain Lifestyles certain ways of of being in the world like when you put on
00:47:10
something that makes you feel good there can be an emotional component to that experience that's very very strong it's
00:47:18
interesting because I was thinking about Apple as well through that lens Apple's a great example obviously so if we think about the drive to acquire very much a
00:47:24
status project product and it always has been Bond again most much of their advertising is about connecting people
00:47:30
in connection learn again you know much of their marketing is about the fact that you can learn on these devices like
00:47:36
the iPad for example defend they talk about how encryption a lot and huge
00:47:42
focus on security and privacy right now for that reason yeah the drive to feel I guess most of their marketing when I
00:47:48
think about the Vision Pro where they weirdly show like the dad and his kids and he's got this massive headset on I
00:47:53
guess that was an attempt to arouse em The Vision Pro now has this sort of spatial video where you can you know one
00:48:01
of my team members when they first put it on for the first time remarked that they wish they had got spatial videos of their grandmother that's passed away
00:48:08
because but that's the kind of narrative that they show with the products as well is that it's going to they really put at the heart in the the marketing
00:48:14
initiatives they do so they really do a really good job at hitting all of these yeah I I would say do you remember the early iPod advertisements with like the
00:48:22
white silhouette person dancing on a Col those advertisements were straightforward feeling
00:48:27
a thousand songs in your pocket it's how the songs make you feel this is a way that you can feel that more often or
00:48:33
more strongly it's pure emotion and they specifically you know
00:48:39
so a more like straightforward drive to acquire on a technology product is is
00:48:44
like how many gigabytes of storage does this thing have and they talked about they made a
00:48:49
deliberate decision not to talk about that at all because it didn't matter people didn't care it was all about
00:48:56
here's how you can feel through the experience of using this product to have an experience you wouldn't otherwise
00:49:01
have I mean this highlights a really important point about marketing but building products and deciding what to build which is how important is it to
00:49:08
make something that is logically better versus something that is emotionally more compelling yeah in an Ideal World
00:49:16
you do both um you can go a long long way with
00:49:21
emotion even when you don't have um straightforward
00:49:27
Superior product benefits you know going going back to uh our our discussion of candles earlier candles have been around
00:49:35
for what hundreds of years like you're probably not going to to make you know
00:49:41
barring Material Science advancements you're probably not going to make a a a technical contribution to Candle science
00:49:48
in the process of making something speak for yourself I mean it's possible it's my next business IDE I told you yeah um but
00:49:56
like things like the packaging and the marketing and the scent and the unboxing
00:50:03
experience and the anticipation of putting it out as as the centerpiece when all your friends come and all of
00:50:10
that like there are so many emotional hooks to that sort of
00:50:15
experience that you could argue that candles are sold almost all on emotion and that's great
00:50:22
that's the value that's being delivered do you know a better example of that I've came across recently liquid death
00:50:28
oh yeah it's just water what yes they built a billion doll
00:50:33
business selling water in a fancy can totally and affiliation like there's a little bit of a bonding or I'm the type
00:50:39
of person who wants to present to the world in this particular way so I don't buy Fiji I buy liquid
00:50:46
death sure it's just water it's just water sometimes it's carbonated or flavored yeah come on it's water I I saw
00:50:53
some I thought these stats might be out of date but it was maybe last year the the year before I saw that they were selling half a billion dollars of water
00:51:01
and they're like a fairly new market entrance in the grand scheme of things and and from what I can observe it's
00:51:07
just a different can yeah and the packaging matters the affiliation matters the story matters why do you
00:51:13
think they won I think they were first so that's also
00:51:19
um you talk about in your book the value of doing something big and crazy for the
00:51:25
value of doing something big and crazy I mean they were the first to do something
00:51:31
crazy on the marketing side for water it was a really boring product category very straightforward very functional um
00:51:39
and what their big Insight was the way that we talk about it the way we package it the way we present it matters and
00:51:46
there's a certain Subs segment of customers that would not buy a straightforward bottle of water because
00:51:51
they don't care but if they can signal something about themselves or a group
00:51:58
affiliation in in some way shape or form through the packaging of the product then then to a certain subse of
00:52:06
customers that's valuable I've been thinking about this theory for a while last couple of months maybe six months
00:52:11
now that Brands need to especially New Market entrance in saturated busy
00:52:17
markets like if you're coming out with an energy drink right now or you're coming out with a can of water you the
00:52:23
easiest way to market in terms of marketing is if you you do a really good job of making it clear that you are the
00:52:30
antithesis of the incumbents yes so you are a or not an and in your customers's
00:52:37
decision framework for and what I mean by that is to be very specific um I've
00:52:43
invested in a company called perfect Ted it's actually the drink in my cup right now and when in one of my first meetings
00:52:48
with them um when we sat down I said you know this brand I think will win if the consumer walks down that Supermarket
00:52:54
aisle and thinks to themselves I can be a insert incumbent energy drink
00:53:01
brand mhm or a perfect Ted person I can't possibly be both right and we all
00:53:06
know that well I think a liquid death customer doesn't believe they can be a
00:53:12
EV and Water customer sure because that it's so clearly they've stood for something so much so that in doing so
00:53:19
they stand against something and and this is what breakout brands have done Brew dog is a good
00:53:24
example in the UK brw dog came into the market Indie Punk beer they literally took Carling beers and stuff like that
00:53:31
to Fields as part of their marketing and blew it up with dynamite to say we are not commoditized beer we are the
00:53:37
antithesis we are an awe you're either with them or you're with us yep but that takes guts it does it takes Bulls like
00:53:43
liquid death Bulls yeah yeah and there's there's a whole like on the psychological side of things the the
00:53:49
studies about signaling and counter signaling like this is this is how fashion in in the the broad scale works
00:53:57
so all the cool people high status fashionable people start wearing a thing
00:54:02
to Signal group affiliation of like we are the type of people who wear this
00:54:08
yeah and then very quickly you have follow on folks who like oh the cool
00:54:13
people are wearing this I should start wearing this too and that happens a couple Generations until that thing is
00:54:20
at marks and Spencer Target uh choose your retailer and then
00:54:27
the people who want to distinguish themselves for from all of the things
00:54:32
that are being sold the mass retailers will change Fashions specifically to signal that we are not that and so the
00:54:39
cycle begins again and so that that's just like social signaling is a rabbit hole that
00:54:45
you could spend decades going down and not get to the end of it but it's all
00:54:52
about who am I presenting myself to be in the world who do I affiliate with who
00:54:58
do I not affiliate with and counter signaling is noticing a signal that's
00:55:05
happening out there there in the world and making a deliberate decision to be the opposite of that or the the the
00:55:11
antithesis of that in some ways and that is such a fascinating part of
00:55:19
human psychology that um generally speaking if you can so you
00:55:26
could say like um Apple did a lot of counter signaling because Microsoft you
00:55:32
know some of the incumbent manufacturers was their uh their famous uh 1984
00:55:38
advertisement was almost pure counter signaling it was almost pure emotion and it set them up as the polar
00:55:47
opposite to faceless beig computer box Corporation and so yeah like if if
00:55:55
there's something that is is the prevailing Trend in a certain industry it can often pay to you know in in the
00:56:03
anthropological sense take a step back notice what's going on here's the signal that's being sent and then make a
00:56:08
deliberate decision to be the polar opposite of that it takes guts though because there's no blueprint for the
00:56:15
opposite yeah and you stand out yeah which is great you get attacked yeah I mean that's the the benefit of
00:56:20
controversy too so controversy can be a wonderful marketing tactic if you use it
00:56:25
responsibly responsibly and so you know you don't necessarily want to turn your business into a soap opera but by um by
00:56:34
deliberately courting a certain amount of controversy focused on the benefits or the features you can attract a lot of
00:56:41
attention that way and that's what I mean by the brewog example where they took beer to their competitiv beer to a
00:56:47
field and blew it up with dynamite sure and said we are not commoditized beer they got they got destroyed they got attacked so so much but the the
00:56:53
controversy is energy and it's making people make a decision exactly and that
00:56:59
results in what is what became a multi-billion dollar Indie beer brand
00:57:05
with a fraction of the marketing budget but also that had been around a fraction
00:57:10
of the time versus the incumbents really interesting Jane warring was on the podcast she's the founder of dermologica and she said the same thing to me she
00:57:16
said you know she's Built This Global Beauty brand she goes we need to piss off the 80% to get to the the 20% she go
00:57:23
we don't need everybody to like us that's not a brand exactly a brand makes you feel something y um but most people
00:57:28
that are struggling right now with marketing I think much of the reason they are struggling is because they are
00:57:33
vanilla wallpaper yeah I mean this going back to our new product development conversation that's what a lot of people
00:57:39
struggle with too because they have their first conversation with somebody who's like oh I hate that it's GNA work
00:57:45
for me it's like oh no yeah what am I doing wrong how can I fix this it's like no no no no you don't need all the
00:57:51
people you need the tiny fraction who care more than everyone else M and a
00:57:58
certain like a certain amount of polarization is a very very good thing because it means that the thing that
00:58:04
you're doing is distinctive enough like the people who care really care they
00:58:10
really love it they're going to buy it consistently buy it often the people who don't care might be completely apathetic
00:58:17
to the category you might not ever spend a million dollars in 10 years you might not ever be able to get them to care and
00:58:25
so your job is at a market marketer is to attract the attention of all of the hyper responders the people who care a lot care often and like are really into
00:58:32
it and then all of the people who don't care and are never going to Care they can go away and that's fine if I wanted
00:58:39
to be an exceptional marketeer if I wanted to you know I've got a product and idea and I want to make sure that it penetrates a very
00:58:45
noisy online Market but even an IRL Market what would you um what kind of
00:58:52
skills and principles or first principles should I really be thinking about to become a great marketeer
00:58:57
because you know we can get carried away with the fish and what I mean by the fish is tactics and strategies but what
00:59:04
is the fishing rod what is the the mindset the principles that are going to make me a great marketeer for the next 30 40 years regardless of change yes
00:59:11
fundamentals of human attention that comes down to psychology so so the vast
00:59:16
majority of people moving through their lives are busy stressed overwhelmed
00:59:24
already have too too much information bombarding them from all uh all points
00:59:29
at all times and so figuring out I think this is a story you tell in
00:59:35
your book actually so so Jenny on the side of the road who who's who's broken down having the worst day of her entire
00:59:42
life um it's a little bit hyperbole but it's it's true like most of us are just
00:59:49
wildly oversubscribed in in terms of attention and time and energy and so
00:59:54
figuring out the little bits of being able to to highlight the thing
01:00:00
that's most important most interesting most valuable upfront quickly in a way
01:00:05
that cuts through that is the primary skill of marketing and a lot of the the other particulars
01:00:14
the tactics the strategies are very dependent on what Market are you operating in what scale are you
01:00:19
operating at like all of that stuff but fundamentally understanding that people are busy and starved for time and
01:00:26
attention how can you grab it and what can you do to keep it um that's the primary skill of marketing by far so if
01:00:32
I'm if I'm running that if I'm thinking about starting my candle business what is step three in your sort of I think
01:00:37
you said five-step framework of what really matters sure yeah this is sales okay sales and so for a candle business
01:00:43
this might look like direct sales online it could also look like intermediate
01:00:49
intermediatory sales like through a distributor and so it's funny like value creation
01:00:56
marketing value delivery and finance all of those are the processes where uh where money is Flowing out of the
01:01:03
business you're spending money to do all of this analysis uh sales is the part where money comes in which makes it
01:01:09
makes it particularly important and so some of the early decisions around sales
01:01:14
are um how are you going to ask for the sale what does the sales process look like and are you dealing directly with
01:01:22
the customer that who is purchasing from you or are you dealing with some sort sort of independent third party or
01:01:28
sometimes multiple third parties in the process like a retail or distributor exactly okay and in order to be
01:01:36
exceptional at selling my candles is there anything that I should bear in mind maybe when I'm making the
01:01:42
candles how I'm packaging the candles the way that I'm you know going to those retailers or yeah so I think
01:01:49
um there's a part of because sales is kind of in the
01:01:55
middle the process there's a part of sales that intersects with marketing in the sense of you're trying to make this
01:02:01
maximally appealing to get someone to give you money for it and so the
01:02:06
customer understanding how how can how can we be persuasive in getting someone
01:02:12
to say yes this is for me here's my money I would like one please there's also a part of sales which is somewhat
01:02:20
neglected which intersects with the value delivery part of the process which is the point a sale is not just to get a
01:02:27
customer in an ideal way it's to get a happy satisfied customer someone who not
01:02:33
only purchased the thing that you bought but is happy with the thing that they bought and is thrilled that they did
01:02:39
business with you and is planning on doing business with you again why is that so important well it's relatively
01:02:45
straightforward to make a sale once um usually the first sale is the most
01:02:50
expensive and so generally a repeat C repeat customers are the best customers you will ever have they are already know
01:02:56
you exist they already know your stuff is great um you don't have to attract their attention again necessarily um and
01:03:02
depending on what you're selling like those repeat customers can the lifetime value of a repeat customer can be
01:03:09
extraordinary and so if you've already done the work to get a customer once then you should want to keep them happy
01:03:16
and keep them around for as long as humanly possible what's lifetime value oh lifetime value this is this is a fun
01:03:22
one um so lifetime value is the sum total of all sales of a customer with a
01:03:30
business and so imagine um Jack I sell jack a candle
01:03:36
yes now Jack how many candles do you uh do
01:03:42
you burn a year seven seven okay so take the The
01:03:48
Profit that you make per candle so I'm selling the candles at $10 and I make $1 profit on them yep times s
01:03:56
okay so the lifetime value well let's say we're just over the course of a year $7 profit for let's take someone like
01:04:04
Jill who burns the candle every week wow
01:04:09
and not just this year she Burns a candle every week years and years and
01:04:15
years running so for Jill 52 time 7 is
01:04:21
$364 and so she's a much more valuable customer than Jack is by a lot and so if
01:04:30
you had to to to make a choice between Jack and Jill like you should choose
01:04:35
Jill every single time customer service matters right it does yeah because people many companies see it as like an
01:04:42
annoyance like I've sold you the [ __ ] thing why you email me stop bothering me and they treat you like you're a
01:04:47
nuisance yeah yeah and that's a shame um because really like those happy repeat
01:04:54
customers are not just like your high lifetime value customers the customers that will
01:05:00
stick with you keep spending money with you they're also a primary source of marketing like Word of Mouth marketing
01:05:06
is all happy customers telling other people who might benefit from your product that hey here's this wonderful
01:05:11
thing you should probably check it out and so yeah like things like post Sal
01:05:18
support um sometimes customer reactivation so like to your point
01:05:24
earlier it's a very straightforward marketing technique called reactivation if you can contact Jack and
01:05:32
say Hey you bought candles from us last year would you like to buy candles from us this year and get him to to pick up
01:05:39
just a couple more more candles like the cost of that promotion is potentially
01:05:44
very small you already know he exists you already know that he's purchased um can you just get him to do that again um
01:05:52
those are some of the most effective Marketing sales campaigns that you can possibly run but it also requires that
01:05:58
they had a good experience with whatever it is that you're offering in the first place is there like a sales equation of
01:06:05
sorts is there like a you know when I'm thinking about how to close a deal how to sell that candle is there a skill set
01:06:13
or a framework or a model that I should be thinking through when I'm trying to sell it to Jack or Jill um there are
01:06:19
many many Frameworks I think the um the biggest most most popular one uh which a
01:06:26
lot of people get stuck on as the whole features versus benefits conversation and so
01:06:33
um in the context of candles Fe a features conversation would be is this
01:06:39
candle is made from 100% soy wax people don't necessarily care it's not relevant
01:06:45
to the reason that people purchase candles benefits are the things that people that get to those core human
01:06:52
drives the things that that motivate the purchase to begin with and
01:06:58
so one very useful way of thinking about this is whenever you're doing any sort
01:07:03
of marketing or sales you're focusing on the benefits the things that you're delivering to people the things that are
01:07:10
enticing and if you talk about features at all you use them as reasons to
01:07:16
believe that you're going to be able to deliver the benefits that are promised and so um if for example you're you're
01:07:26
uh taking an an ecologically friendly approach to your your candle business um
01:07:33
the fact that 100% soy is very clean burning and environmentally friendly might be a reason to believe that this
01:07:40
benefit is true but it's not the primary reason that people are going to purchase interesting and a lot of people I guess
01:07:46
are making the mistake of focusing on the features of their product yeah this is the the difference
01:07:52
between um an iPod has one gigabyte High Drive hard drive and a thousand songs in
01:07:59
your pocket a thousand songs in your pocket is a benefit the size of the hard drive is the feature that enables that
01:08:08
and why why is it more powerful and compelling to the customer to focus on the benefit versus the feature is there
01:08:13
something in our neurology is that a word neurology it is a word is that the right context in our brain yeah well I
01:08:20
think this this gets into um some Bier psychology things which is people
01:08:26
generally before making a purchase decision imagine what their life is going to look like if they go down this
01:08:33
particular route if I buy this thing if I uh sign up for this service if I
01:08:38
become a member at this club or gym or or or whatever um there's there's a a
01:08:45
mental simulation process that very often happens of like may maybe buying a
01:08:51
new car is a good tangible example of this like before you buy the car you did the test drive and you imagine like what
01:08:58
my what would my life be like if I was driving this every day if I pull this into into my in my driveway where are
01:09:04
the neighbors gonna are they gonna look at me gonna think I'm cool you know like there's
01:09:10
there's this like with a little bit of information our brains can kind of extrapolate or
01:09:16
start to predict what is likely to happen out into the future to a certain extent and this is you know to to to
01:09:23
some of the things you talk about in your book about storytelling this is why stories work for marketing and sales it
01:09:29
helps people engage that part of their brain that can that can simulate a potential future that looks and feels
01:09:36
really great and start to anticipate it get excited about it
01:09:41
and like when you're selling a car on the sales side of the the
01:09:47
Spectrum rule number one is get the potential customer in the driver seat of
01:09:52
that car as quickly as possible nothing else matters you want them to engage in the process
01:09:59
of driving and imagining as quickly as possible because that that's when they start to convince themselves that this
01:10:05
is something that they might want to have in their life so anything that you can do to engage those kind of
01:10:11
simulation prediction sort of of processes the better if you were to try
01:10:16
and pin down the very core parts of what makes a company
01:10:22
successful what are what is what are the core components of that what are the fundamental games at Play in business in
01:10:28
your view yeah so there I think there are a bunch of different ways to answer
01:10:34
that um we've talked a lot about the five parts of every business those are the fundamentals of what the employees
01:10:41
are actually doing MH um in general you want to hire people who
01:10:48
are curious engaged excellent
01:10:53
communicators and are signing up for whatever whatever it is the the the
01:10:59
long-term objective Mission Vision of of the company here's what we're doing
01:11:04
here's why it matters here's exactly who we're serving here's why that matters here's how we're going to go about doing
01:11:11
that and from there everything that happens within the company each of the employees are going
01:11:18
to be focused on one or more of these five essential parts of the business in
01:11:24
an ideal World they understand all five and how they interrelate to each other and
01:11:30
how something that is done in one like say the marketing end of side end of
01:11:36
things might really make a huge difference on the value delivery or customer service end of
01:11:42
things if you have all of those pieces in place then the question becomes how
01:11:48
large does this business need to be in order to serve its customers at to the maximum possible extent in a long
01:11:55
long-term sustainable way and then what level of internal
01:12:02
organization makes the most sense so people can spend most of their time doing work related to the five parts of
01:12:09
of every business and as little time as possible managing the rest and so this
01:12:14
is kind of the the flip side of of some of the common failure cases of bureaucracy paperwork busy work all of
01:12:21
these things what level of management do you need um how can you minimize that how can you
01:12:29
make sure that um to me good management is is
01:12:36
helping remove barriers to people who are doing skilled work how can you
01:12:41
remove as many things from their plate as possible so they can focus on the parts of the business that are are
01:12:47
generating the most value and so there's a lot um I think this was the
01:12:55
founder of Southwest Airlines herp Keller it's like hire for attitude train
01:13:01
for skill I think there's a lot to be said for that because because I'm thinking a
01:13:06
lot about that person who is you know again they're starting their candle business and they're trying to figure
01:13:13
out what this game of business fundamentally comes down to in 10 years
01:13:18
from now is it how smart I am is it how good I am at assembling a group of smart
01:13:24
people is it culture is it the vision I set is it the product I build is it all of these things but if we just start
01:13:29
with hiring then because this is in my experience where people often succeed
01:13:35
and fail and often where a lot of their biases show up that they don't even know about sure um how important is
01:13:44
hiring to building a great business and becoming a successful
01:13:50
entrepreneur complicated answer to that okay so it can be more or less important
01:13:57
depending on exactly what you're offering I'm offering candles you're offering candles yeah so so to me
01:14:05
like making some assumptions if you're handling if you're selling candles
01:14:11
Direct on the internet with a small distribution center and mostly online advertising your team is probably going
01:14:18
to be relatively small and that can be a really good thing if you're selling candles in distribution and tooling up a
01:14:25
manufacturing line and uh and going off and and calling on all these large customers and potentially producing Mass
01:14:33
Market candles it's a very different business operation and so there's a lot
01:14:38
of like understanding the necessities of the game that you're playing and then
01:14:44
matching your hiring exactly to what those needs are but not more I think
01:14:50
about um when I was thinking about this candle business that I'm hypothetically going to launch one of the things that
01:14:56
might stop me from launching a candle business as it does for many people is that there are already lots of [ __ ] candles and in every industry you know
01:15:03
when I hear entrepreneurs or I hear sof preneurs which is someone who's got an idea on the sofa one of the reasons
01:15:08
they'll give as to why they've not started the business is because they've just they've done some market research and they've discovered there is already
01:15:15
someone solving that problem uhhuh and then they go no there's no there's no money to be made there what role does
01:15:22
competition play in this whole pitch is competition a bad thing a good thing a signal that I shouldn't yeah there's
01:15:30
something really fun here um I talk about it in the book I call the iron law of the
01:15:36
market which is um a way of saying that markets that don't exist don't care how
01:15:43
smart you are it was a mark andreon quote from way back in his Netscape
01:15:48
days and it's the whole idea like it's actually a really good thing that there
01:15:54
are a bunch of people selling candles in the market because that means that there's a large Market of people who are
01:16:01
willing and able to buy candles it validates the the the need it validates
01:16:07
the existence of the market in the first place the markets you need to be really careful about are the brand new to the
01:16:15
nobody has ever seen anything like this on the face of the Earth because not
01:16:21
only do you need to educate and convince people you have no idea whether people
01:16:27
have will purchase this thing that you've made this is a story a story that
01:16:32
I tell in the book um Dean Cayman like prolific inventor this was the development of the
01:16:39
segue the like oh yeah balancing scooter thing yeah I remember I think this was a
01:16:44
Time magazine article something like that was like this is the this is the mystery invention we're not going to talk about it yet the mystery invention
01:16:51
that is going to change the way that cities are planned
01:16:56
the hype for it was absolutely extreme and when it came out it turned out that
01:17:01
people didn't want to buy a $110,000 alternative to walking or riding a bike
01:17:07
and so it's like those like nobody's ever done this before can actually be in
01:17:13
in a weird way a bad sign um you want something that like the
01:17:19
market exists the need is there people are excited about it people are looking for Solutions and then like liquid death
01:17:26
if you can come in and do it in a fundamentally different way that grabs a lot of attention it's a really really
01:17:32
great promising sign but if it's completely brand new that's that's more of a a warning sign
01:17:40
than than many of the sofa preneurs uh would would chalk it up to be so how should we treat competitors then if I've
01:17:47
got a competitor should I should I attack them should I block them what should I do first learn from them
01:17:55
buy from them become their customer learn as much as you can about what they
01:18:00
do how they do it um customers can be a wonderful source of market research
01:18:06
around what's what's happening in the category what's important what's not what was your experience competitors
01:18:12
yeah totally if you if you're starting a c Candle Company go out and buy all the
01:18:18
candles burn them all smell them all burn them all line your like buy a
01:18:23
bookshelf and fill it with candles why um because you can learn so much about
01:18:29
how people do things um look at their labeling deconstruct their packaging
01:18:34
look at their price points where are they selling how are they doing their online advertising um and the wonderful
01:18:41
thing is aside from your time and maybe a little bit of budget all that market research is free you just get to go out
01:18:49
and and learn from what people are doing and then combine that with your own
01:18:54
research going out and talking to customers on your own having your own experiences your own ideas and that's
01:19:01
where you get your unique take your taste your Twist on on that particular
01:19:07
way of of doing things what else do I need to be thinking about so I've done my market research on the candle
01:19:13
business we've got the marketing done I'm I understand the the sort of sales
01:19:18
framework that I should be thinking through I've bought every candle in the market now MH is there anything else
01:19:24
that is really important to be thinking about as I go forward and launch this company oh yeah we haven't talked about
01:19:30
dollars and cents at all yet dollars and cents yeah Finance okay so you know as
01:19:35
you're doing all of so development takes money making product uh requires money
01:19:41
um customer service requires money manufactur like all of the you're spending a bunch of money making this
01:19:47
product you have at this point since this is a startup you have a price that you think is supportable hopefully
01:19:53
you're collecting pre-orders you're getting some Market information about like how much you potentially be able to
01:20:00
make here financial analysis is the part where you're taking a look at all of
01:20:05
these decisions and tradeoffs that that you've been making where am I spending how
01:20:11
much if I have to make a choice between a or b which one am I am I going to make
01:20:17
and then the finan finance is basically just a systematic way of making decisions around monetary
01:20:25
considerations um in the case of a manufacturing business you might have raised some some early Capital friends
01:20:32
family loans investors credit cards whatever how much do you have at your disposal how much runway do you have if
01:20:40
you've hired people how many months do you have left before you really need to be bringing in more than than your
01:20:46
outflows or else you're going to be in trouble very quickly I've got a corporate job and I've got $2,000 of savings yeah okay so so relatively small
01:20:54
so then like the financial decision making might be how many candles if I
01:21:00
make a small batch like maybe of that $2,000 how much
01:21:06
am I going to allocate to making the actual physical product packaging
01:21:11
shipping distribution how much am I going to set aside for marketing and sales sorts of thing that's an
01:21:17
allocation decision and so your early decision making is how much do I have at my disposal what are the the critical
01:21:26
things that need to be met I have to have product to sell I have to get people's attention somehow I have to be
01:21:32
able to deliver this when people buy it and then you start making lots of decisions lots of trade-offs about we're
01:21:39
going to put this here this here this here this here what if you're bad at math because a lot of people I think
01:21:44
they're put off business because they hear about gross margin and net profit and revenue and they go oh God I was bad
01:21:49
at math in school so I'm never going to be good at business and or I meet a lot of Entre especially in the den but just
01:21:56
in life generally who basically avoid the finances of their own business yeah
01:22:01
because it's just not their strong area so I think they think they can just maybe they're right because I did meet Richard Branson and he told me that you
01:22:09
know he's not very astute with finances and he said to me you just basically
01:22:14
need to know three numbers in business um and he also said to me that he was
01:22:19
sort of 50 odd years old when he was in a meeting where his directors were talking about net profit and he had had no idea what they were talking about so
01:22:25
one of them pulled him out of the room and drew a picture of a ocean and put a net in it and said the fish is in the
01:22:32
net your net profit and at the time he was running one of the biggest groups in Europe you just go so what how important is this thing called finance and money
01:22:38
and accounting yeah I mean most of it is common sense in simple arithmetic really
01:22:44
like we're talking addition subtraction multiplication division um some of the
01:22:49
the definitions when you really get down to it are relatively straightforward
01:22:55
um so how much you going to sell it for minus how much does it cost to make how much does it cost to Market how much
01:23:01
does it cost to deliver is your profit um and then you know how much on the
01:23:07
things that you have to spend um every month so in the case of an online
01:23:13
business uh your website your shopping cart credit card processing all the way up to if if you have a physical business
01:23:21
how much are you spending on salaried employees office space electricity
01:23:26
utilities um there's some very straightforward uh Concepts like
01:23:33
amortization like can you take something that would be a a larger pool of money
01:23:39
how much does that cost you per month as an equivalent can you build that into your budget how do I learn this stuff if
01:23:44
I didn't go to school that's why I wrote the first LBA okay so yeah can you will
01:23:50
you tell me about all of this stuff if I get this book yes it so the the whole idea aidea behind personal MBA was to
01:23:57
take all of these Concepts like amortization like nonprofit all of this
01:24:03
and explain it in the clearest most direct most straightforward plain
01:24:09
language that I possibly could and is it easy it's very straightforward yeah is
01:24:17
there a a most important number or or a most important set of numbers in
01:24:22
business when it comes to running my candle business if I was to really stay focused on a particular number or metric
01:24:29
is there one in particular yeah I think so early on the things that you're going to want to pay very close attention to
01:24:37
like early stage entrepreneurship is all about is this Su are we to the point of
01:24:43
keeping this business sustainable can we keep the lights on can we keep going and is it worth it to me or not and
01:24:52
so your monthly fix overhead like how much am I spending every month just to keep the lights on
01:24:59
everything cleaning yep everything my my Gmail account everything yep okay yep so
01:25:06
what is what are my monthly outflows what are my monthly sales numbers and it's monthly because usually
01:25:13
our modern expenses happen monthly rent payments happen monthly all that how
01:25:18
much is coming in product service offer sales how much does it cost to deliver
01:25:25
that in total what is my monthly overhead
01:25:30
everything required to keep the lights on and at the end of that is net profit
01:25:37
which is how much do I get to keep and is that enough so for example
01:25:42
if you're if you're working 80 hours a week keeping this candle business open
01:25:48
and you have $5 to your name at the end of that month you might be able to sustain that for a little bit but at a
01:25:55
certain point there are going to be some very difficult decisions around technically we're making money
01:26:02
but it's just not it's not enough to make this sustainable and so some of
01:26:07
that early number like as as an early stage entrepreneur is like what is that for you like based on your life based on
01:26:14
your lifestyle what you hope and dream for yourself what's the number that makes a
01:26:20
venturous long-term sustainable like I can keep doing this it makes sense for
01:26:25
right now to keep going you focus on getting to that number first and then from there you
01:26:32
have a lot of different options one of the mental models that I think we share is around this idea of
01:26:37
experimentation yes absolutely and it's one of my favorite subjects because it's been a real Revelation for me over the
01:26:42
last couple of years in business um which is really this idea that increasing my exp rate of
01:26:48
experimentation increases my rate of success and I think um you know the
01:26:53
podcast is an example of that for me where we've really tried to experiment as much as we can and that's led us to
01:26:59
um the growth of the podcast but when I look across the greatest entrepreneurs in the world they all seem to eventually
01:27:04
arrive at this conclusion that experimentation really is the path to finding the right answers in a world
01:27:10
where the right answer is changing so much yep what is what is for for an entrepreneur that's at the very beginning for someone that's at the very
01:27:16
beginning or someone that's in the corporate world what is it about experimentation that you think is so important to understand yeah I think
01:27:22
experimentation removes the pressure
01:27:27
[Music] to know or feel like you know what you
01:27:33
should be doing every moment of every day um I think there's there's a sense
01:27:39
of like we kind of conflate certainty or over certainty
01:27:46
with competence in a way that's not necessarily functional whereas we're all
01:27:54
very imperfect oracles like we have anticipations based on our knowledge our
01:27:59
experiences um the information that we're collecting about the world around us and we're all using that all the time
01:28:05
to try to predict what's going to happen next just how our brains work it's what our brains are for
01:28:12
and I think there's a sense of we can do that to a certain extent to eliminate
01:28:20
some of the more obvious errors that we might make but when it the when it comes down to
01:28:27
making a decision about something we've never done before the honest answer to
01:28:32
will this work is I don't know let's find
01:28:37
out and so there's a certain amount of if that's the case if we can't be 100%
01:28:43
certain what's going to happen if we try plan a or plan b or plan
01:28:49
C then there are a couple of ways of approaching that one is is um by working
01:28:56
through scenarios of like let's just imagine what would it look like if we chose plan a let's play that out a
01:29:03
little bit let's try to make anticipations about what what might work or what might not um and let's compare
01:29:09
our different Alternatives and and see what what looks the best feels the best
01:29:15
based on our anticipations right now that's valuable but it can only go
01:29:21
so far because it relies on all the the knowledge and EXP experience that we've collected to date it doesn't account for
01:29:28
the knowledge and experience that we're going to gain through the process of making a choice and learning from the
01:29:35
choice and so one of my very favorite mental models this comes from computer
01:29:41
science and and decisionmaking is called the explore exploit
01:29:47
trade-off and this might be entertaining it comes from decision research uh actually about
01:29:53
gambling of of all things like imagine um imagine you walk into a casino and
01:30:00
there are a 100 slot machines that you get to play for free each of the machines has a
01:30:07
different payoff but you don't know which one your job is to find the very best
01:30:15
one how do you go about figuring that out you try them all yeah you try them
01:30:23
so you start collecting information right like the thing to do you when you walk into the room you have no
01:30:28
information and so the first phase of solving this problem is to explore you
01:30:34
just try a whole bunch of things and you collect information every time you pull this slot machine does it pay out or not
01:30:43
the longer you do this the more information you collect and after a certain period of time you start to get
01:30:49
a feel for patterns of some things seem to be more Obviously good and other
01:30:56
things seem to be more obviously bad and so over time you shift into the second
01:31:02
phase which is called the exploitation phase so you take the knowledge and experience that you have and you use it
01:31:09
to do the best performing thing that you're aware of at the time more often
01:31:15
so you're playing the higher winning slots more the key is though the exploration
01:31:22
phase never stops it just gets smaller over time so if you're going to play this game optimally
01:31:28
there's always a certain Subs segment of your time that's dedicated to exploring
01:31:34
to collecting information to trying new things and I think this kind of General
01:31:41
way of going about the like this is what early career early entrepreneurship looks like
01:31:49
you're trying a whole bunch of very different things sometimes in in information about what works and what
01:31:55
doesn't so in the context of my candle business yeah I'm going to I'm going to try a bunch of different candles I'm G
01:32:02
to I'm going to try I think the key part is we'll get like try other stuff but
01:32:08
the the part that I often see people Overlook is what you actually said after
01:32:13
that which was collect information uhuh which is you know people will listen to this and they'll go C right guys they'll
01:32:19
come to the corporate office they'll go right we're going to try a bunch of new stuff but that is just wasted time if you're not accurately correct collecting
01:32:25
the feedback yes because that's the power the feedback is the power right failure is nothing without feedback yeah
01:32:32
exactly and that's like so trying the new thing and then paying very close attention to what happens is the
01:32:38
valuable part so like in the in the context of the candle business like maybe you try 10 different scents at the
01:32:45
very beginning and you do small batches of each one and how do I test that in the context of a candle business how do
01:32:50
I test which is the best scent yeah so um you could do all sorts of different
01:32:56
things like um early on you can get direct feedback so follow up with people
01:33:02
ask so this is where the like quantitative and qualitative research studies can be very very valuable so
01:33:10
your first source of information is what do people buy what's most appealing
01:33:16
where does where does that kind of initial spark go you'll probably see a distribution if you try 10 different
01:33:21
scents you you'll probably see a couple very clearly stand out um and then
01:33:26
contacting customers directly to to follow up what did you like what did you not like um asking quite like we were
01:33:34
talking earlier about how did it smell when it was lit how did it smell when it was not lit like all of those things
01:33:40
spending a little bit of of time digging into it in a deliberate systematic way
01:33:48
is how you get that information could I do this before I even start selling these candles I could I get 10 flavors
01:33:54
um put blank labels on all of them and also try and create a situation where you can't see it because again I'm
01:34:00
trying to limit the variable so I don't want you to make your a decision based on color put you in a pitch black room
01:34:06
this is actually what a lot of companies do companies I've invested in called hu does this they have these pitch black rooms at their HQ which they invite
01:34:13
people into and these are like sensory deprivation rooms I guess because you there's no light there's no nothing you
01:34:19
can't see anything and in the context of candles get 10 strangers off the street
01:34:25
to smell them all maybe 100 yep and just to leave some scores yeah and then get them to smell them when they're lit and
01:34:31
take that data as well you can absolutely do that that's crazy it seems so obvious but people don't do this stuff yeah and it like it doesn't take
01:34:38
that much more work you're actually limiting your risk because you're not committing to you know one big batch of
01:34:44
something that you think will work yeah you just experimenting a little bit more broadly collecting some information and
01:34:50
allowing that information to guide your future to decisions you talk about this thing in your book called goal's law
01:34:58
yeah what's gal's law G's law is the idea that any complex system essentially
01:35:06
evolved from a simpler system that worked so if you want to create a
01:35:11
complex system that works the easiest best thing to do is to start with a simple system and then
01:35:18
build it up from there and so this is like
01:35:23
when we're talking about this hypothetical candle business we're not talking about the multinational
01:35:30
distribution version of the candle business quite yet there's a simpler version of that business that must exist
01:35:38
in order for it to ever reach the level of complexity and success that would allow that to actually operate in the
01:35:44
world and so one of the the reminders of of G's
01:35:50
law is that it's actually okay to start simple straightforward strip it down
01:35:58
focus on the essentials start there because every additional bit of
01:36:03
complexity needs to serve some sort of purpose to justify its costs either
01:36:09
direct cost or time attention opportunity cost and so I think you to our earlier
01:36:17
conversation sometimes complexity can be seen as as a
01:36:22
bit of a weird status signal like I'm fancy I'm sophisticated I think the more
01:36:29
sophisticated thing to do is to start simple and keep it simple on purpose and
01:36:36
then make every additional bit of complexity earn earn its way because
01:36:41
complexity isn't value this is I guess this the the thing we get wrong we think if we take a candle and we add some neon
01:36:46
lights to it and we add some I don't know like a metal lid to the top of it and then we add you can charge your
01:36:51
phone using the candle sure we think because we've added more stuff people are going to Value it more therefore
01:36:58
they're going to pay for it more yeah but that's not necessarily how the world works exactly you're going to screw up
01:37:04
so many things by adding those features you know the best example I can give is this whoop on my wrist which I'm an
01:37:09
investor in and Ambassador for so I'm not Shilling it here but it's just a something that always comes to mind
01:37:14
where you ask the founder of why you didn't add a watch to it why you didn't add the
01:37:20
time because you could simply just put the time on there sure but he said adding an additional feature changes the
01:37:25
frame and that really made me understand this idea that more isn't more in as it
01:37:30
relates to value of products because the minute you add the time to a whoop it becomes a watch and then people have
01:37:35
these whole new set of expectations of a watch it's a fashion item etc etc
01:37:41
interesting I've never heard that that term before gouls law yeah we like it's instructive that we're talking about
01:37:47
candles and not about some complex mechanical device that you would bolt on to a a building's a HB system to deliver
01:37:55
scent to the entire space right like don't start there maybe start with a
01:38:00
candle and then at a certain point if it makes sense to move in a in a direction based on what your customers are telling
01:38:05
you that's fantastic but but keeping it simple from the beginning is is the way to go once upon a time if you had a
01:38:12
business idea it was exceptionally difficult to get going but now in the
01:38:17
age of Shopify it is exceptionally easy as many of you will know Shopify are
01:38:23
sponsor of this podcast if you don't know Shopify it's an exceptionally simple web platform for anybody that's
01:38:29
got an idea that wants to transact on a global scale so things like these conversation cards which we sell we've
01:38:35
sold using Shopify and it only took us a couple of clicks to get going so why did
01:38:41
we choose Shopify for a number of reasons but I think one of the big ones which goes unappreciated is their checkout system converts 36% better
01:38:48
compared to other platforms and here's what I'm going to do to remove the cost for you if you go to shopify.com Bartlet
01:38:56
you'll be able to try Shopify for $1 a month I've seen Shopify completely
01:39:02
change people's lives and for many of you I think it could change yours we
01:39:07
haven't spoken about this book though first 20 hours yeah the first 20 hours
01:39:13
how to learn anything and you have a TED Talk don't you which was crazy yeah crazy crazy I
01:39:20
don't know if it's hit 40 million views yet but PR pretty close if not 40
01:39:26
million views on a TED talk about the first 20 hours how to learn anything
01:39:32
yeah why why did it do so well I think for a couple of different reasons because that's one of the best view TED
01:39:39
talks of all time yes that's crazy yes I did a TED Talk nobody nobody watched it
01:39:44
I did like T talk are fun they're very fun
01:39:49
um yeah so so the T talk for the first 20 hours did did very well and I think I
01:39:54
think part of it has to do with it's something we all have in common right like wanting or needing to
01:40:02
learn something necessary useful fun cool not
01:40:09
really having a whole lot of time like we're we're busy people we're busy culturally um and so there's a bit of a
01:40:17
conflicting desire there of like yeah I want I want to learn this but I I don't
01:40:22
have a whole a lot of capacity to spare here um and then the the Genesis of the
01:40:30
book was was digging into some of the psychology research that I that I uncovered in the process of working on
01:40:36
personal MBA which was all about learning new things
01:40:42
and learning that the first few hours of acquiring or learning any
01:40:50
particular skill are validated by research to be both the
01:40:56
most effective and the most efficient so like your rate of improvement per time of of uh or per unit of time and energy
01:41:05
invested at the very beginning of Learning something new is extremely
01:41:10
high and so the question that that sparked the research for the first 20
01:41:15
hours is is there a way that we can take advantage of that consciously like is
01:41:22
there a way that we can be very conscious and deliberate about how we approach the process of learning
01:41:28
something new to make to to to reap the maximum rewards
01:41:36
from that early stage of learning something that you're not familiar with
01:41:41
and how good can we get in in that early early window and in my research you can
01:41:49
go from from knowing absolutely nothing about something to being reasonably good in
01:41:59
much less time than than you would expect so in my experience that's about 20 hours of focused deliberate practice
01:42:08
so call it 40 minutes a day for about a month but but the narrative out on the market is that you have to do 10,000
01:42:15
hours I mean this is everyone uses this phrase in in society they say have you done your 10,000
01:42:21
hours so you're telling me it's actually 20 hours is the key I'm saying different
01:42:26
goals based on different objectives so um K Andrew Ericson was the researcher
01:42:33
behind the the 10,000 hour rule and I think what's important to to
01:42:39
understand about that as a general guideline is those studies were focused
01:42:47
on Mastery of very competitive performance
01:42:52
oriented activities so call it so the original studies were done um with
01:42:58
correlating practice hours to how high a position do you have in like the first
01:43:05
violin and an orchestra sort of thing and there was a correlation between like how much do you practice how good to you
01:43:12
get that's all well and good and yeah generally speaking the more deliberate practice that that you have on on a
01:43:18
certain thing the the better you are that is a true thing to me
01:43:25
me I think it's valuable to shift the spotlight from Mastery which is very
01:43:34
flashy very high status people who are extremely skilled at things have a lot of energy and attention around them
01:43:40
that's great um the type of skill acquisition that
01:43:46
most of us do most often throughout our entire lifespan is figure out how to do
01:43:52
something new for the first time like dejing for me exactly yeah so how do I
01:43:57
do that then know you talk about these 10 major principles of Rapid skill acquisition sure where I can learn
01:44:03
anything in 20 hours what are the most important elements of this that I need to know about if I'm someone who maybe
01:44:08
let's in the context of business has never started a business in my life has never run one before but I do want to
01:44:14
learn how to do it yeah the best way to approach this is
01:44:21
um there's a set of five recommendations that that that go in order and the first is like deciding
01:44:30
exactly what it is that you're trying to do so in my experience like a lot of
01:44:36
people when they at the beginning of the process of learning how to do something the goal is way too big like
01:44:42
it's way too much way too soon um whereas something something specific
01:44:51
concrete and approachable is a way better place to start so um
01:44:58
dejing an entire set at a crazy music festival is not the place to set the goal right at the very beginning
01:45:05
it's I want to do my first song for myself for me it was like I want to mix
01:45:11
that song into that song without it sounding [ __ ] totally exactly and that's a great place to start because then it's like okay this is a concrete specific
01:45:18
thing I know exactly what it looks like you probably had some experience
01:45:25
listening to music of this type knowing when things go well and when they when they don't go well so you had a little
01:45:30
bit of like taste context perspective and so deciding like okay my
01:45:37
early goal is to do this one specific thing it's the first failure mode
01:45:44
because most people don't decide on that concrete specific thing it's way way too
01:45:49
way too nebulous there's not enough to work with so deciding is the first part from
01:45:57
there most of the things that we we talk about as skills
01:46:03
aren't single skills they're actually bundles of smaller subskills that are
01:46:09
all important and you use in in in in combination and so I'm not familiar with
01:46:17
DJ DJing so you can fill in the blanks for me but like what were some of the smaller things that you needed to learn
01:46:24
how to do as a thing to be able to like mix one song into another well you need
01:46:29
to know music because music has different I'm really going to but you so DJs are literally going to laugh at me
01:46:34
in their WhatsApp groups but um different beats per minute so every song has a different beat per minute so you
01:46:40
need to learn about the different beats per minute so you can merge them um every song has a different key I think
01:46:46
that's kind of what they call it a key so you have like an a a b a c and you need to know that because before you even get to mixing them in that's quite
01:46:53
important um so that's the like the music side of thing then there's the like the hardware itself which is knowing how you see two songs coming at
01:47:00
the same time so you need to learn about the hardware before you can mix two songs together and then
01:47:06
um yeah actually interestingly in the first hour of lessons I was expecting to
01:47:11
jump on the decks but the first hour of lessons that I had was all about what is music totally it was like an and how
01:47:17
does music sound good and this kind of like eight bar thing that music goes in so it was all about music itself I had
01:47:23
to start over there whereas I was expecting to jump on the decks yes that is a brilliant example of deconstruction
01:47:29
it's exactly what we're talking about so the skill is not dejing itself it's
01:47:35
learning about Keys learning about Tempo learning about transitions learning about all of these smaller things that
01:47:40
you need to use in concert in order to use them together to do this more
01:47:45
complex thing that you want to do so a good teacher like the value of a good teacher is they can help you with that deconstruction like what are all the
01:47:51
little subcomponents that I need and then the next layer down from that is
01:47:58
once you've deconstructed into the smaller parts that's when you start to do some research of which of these parts
01:48:05
are more important or less important what should I focus on first what can wait until later and so like Tempo and
01:48:14
musical Keys might be really important and so it might make sense to to start
01:48:20
the process there let's get that really solid we can wait for the hardware we can wait for the plugins we can wait for
01:48:27
you know all of these things that comes later get this stuff down solid first nobody wants to wait yeah you know you
01:48:34
know what I mean that's the thing like I think there's an element to which that's
01:48:41
true there's also an element to waiting here going about it in a
01:48:48
little bit more of a deliberate fashion is what gives us an Advantage as
01:48:54
adult Learners like we can approach what we're doing in in a strategic way we can
01:49:00
we can focus our time and attention on the things that are going to have the highest rewards first and so just a
01:49:06
little bit of impulse control of like I'm gonna hold off on the buttons for a
01:49:11
couple hours to learn a little bit of this first like that's where you
01:49:16
start figuring out the inflection points in the skill
01:49:21
like the the thing that if you can just wrap your head around this you can get a huge Improvement in a very short period
01:49:28
of time and then the trick on the research phase and this is the one that I struggle with a lot because I like
01:49:33
research it's fun for me I can get stuck here and so the trick is to
01:49:41
do just enough research to give yourself context understanding what
01:49:49
you're looking for an idea of what it looks like to do well or to not do well
01:49:55
and from there you do just enough to know a
01:50:00
little bit of what you're doing and then you actually start the focused deliberate practice component because
01:50:06
that's where the skill is actually built the skill is not built in research a lot of people seem to get stuck on that research part because they are you know
01:50:13
that people call them in culture procrastinators but I had a conversation with Nel and he said we're discomfort
01:50:18
avoiding creatures and he said whenever you find yourself procrastinating um it's basically because there's discomfort associated
01:50:25
with the task at hand yeah so I had a conversation with someone very close to me recently actually yesterday and um in
01:50:31
our conversation they've been meaning to do this online project for a long long time for two years now and they've just
01:50:37
done everything but this online project and when we kind of deconstructed it as you said it was really
01:50:42
because they don't feel competent yeah in several of the individual pieces so
01:50:47
they're just like researching themselves to death and Mak taking no action absolutely this is one of the biggest
01:50:55
the biggest barriers to learning as an adult um adult Learners hate to feel
01:51:02
stupid we hate to to feel over our head that we don't know what we're doing that
01:51:07
we're going to look bad in front of others that there's some idealized skill
01:51:12
level that would represent success and your early attempts look nothing like that um there was an interesting study
01:51:21
that was done about changes in um in artistic ability
01:51:30
and inclination over the human lifespan and so when when you ask a bunch of
01:51:36
young children are you an artist every one of them answerers yes
01:51:43
yeah I create art that's it's what I do and there's a certain threshold and it usually happens around like the the
01:51:49
Middle grades uh junior highish where people will start to say
01:51:56
like no this not something that I do and there's a certain amount of self-consciousness that develops in the
01:52:02
process of becoming an adult where you can start to recognize that the
01:52:09
difference between what you can do and what you want to do can be somewhat
01:52:14
extreme yeah and that self-consciousness can be an active barrier to to getting started in the first place um so by comp
01:52:22
comparison as well isn't it really because yeah like comparison with other people and then also comparison with ourselves MH um so with other people
01:52:30
like early stages of skill acquisition if you're comparing yourself to the Masters in hours one two and three you
01:52:36
are not doing yourself any favors at all um and then even like I think that's a little bit easier
01:52:44
to avoid because I have only golfed a couple times in my
01:52:49
life comparing myself to Tiger Woods doesn't feel like even like conceptually appropriate thing for me to do that
01:52:55
that's that's not difficult the harder thing is comparing yourself to the other
01:53:01
person who has not golfed very much but somehow hit a shot straight or or
01:53:07
whatever or like it feels like this shouldn't be so hard for me why is this
01:53:13
so hard for me and then like the self recrimination feedback loop starts and
01:53:19
so um I talk about in the in the first 20 hours I call this the frustration barrier and
01:53:26
so generally speaking rough rule of thumb hours 1 to 10 are brutal
01:53:34
emotionally speaking and so those th that's the period of time where um
01:53:41
you're really frustrated things make very little sense you're like I don't
01:53:46
know what a key is let alone a key change what's a beat per minute and like
01:53:53
all of those self-consciousness circuits are fully online fully firing
01:53:58
and um no matter how much you want something those those first few hours
01:54:05
can be pretty brutal it's where most people quit as well I guess yeah and and that's why like it's an it's an emotional management problem and so the
01:54:13
way to get around that also the way to get out of research mode into doing mode
01:54:19
and this is this is where where the title the first 20 hours comes from from the first 20 hours refers to a
01:54:26
pre-commitment which is a very useful piece of Behavioral psychology that says that if you
01:54:34
pre-commit to taking a certain action either a certain amount of times or
01:54:39
within a certain period of time either to yourselves or ideally to other people you're far more likely to actually
01:54:45
follow through on the doing of the thing and so what I found is that in learning
01:54:52
a new skill making a pre-commitment that no matter what I'm going to spend 20
01:54:59
hours doing this thing I might be terrible this might be really
01:55:06
uncomfortable I might hate it I might never do this again but no matter what I
01:55:12
care about this thing that I want to learn enough that I'm going to invest at
01:55:18
least 20 hours of my life figuring out if this is good if this works for me if this is beneficial you said something
01:55:25
there which I think is key which is sure you said this matters to me enough yes that feels like it's a prerequisite
01:55:31
something that we really need to be clear on before we even start yeah you know because without that part you you
01:55:37
refer to it in your 10 major principles of Rapid skill acquisition as choosing a lovable project exactly yeah what does
01:55:43
that matter well it's because we're busy it's because we don't have infinite time energy and attention to do all the
01:55:50
things that might look feel sound fun or interesting to us and
01:55:56
so there there needs to be at least some minimum threshold of yeah this is
01:56:03
important to me to make some trade-offs in other areas of of my life or
01:56:09
to um not watch that that movie or you know not relax on on social media this
01:56:17
night I'm going to carve out some time in my day and actually make this a priority to sit down and do the work and
01:56:24
generally speaking I found that for myself if I'm not willing to make the pre-commitment to put at least 20 hours
01:56:31
into it that's a pretty good indication that it is not important enough for me
01:56:36
to to invest time and energy and in the first place we've been through most of them there so number one is choose a
01:56:41
lovable project number two is focus your energy on one skill at a time we said that one number three is Define your target performance level we talked about
01:56:48
that as well number four is deconstruct the skill and subskills number five is obtain critical tools which I guess is
01:56:54
the tools you need to do the practice right yeah that's um kind of a subset of removing barriers to practice okay and
01:57:00
so the classic example here is um so many people in the world want to learn how to play the
01:57:06
guitar and so the thing to not do is buy a guitar and leave it in the case and
01:57:12
put it in uh a closet upstairs far away
01:57:17
because that just requires too much time energy thought attention of like remembering where it is going upstairs
01:57:23
grabbing the guitar getting it out of the case getting all ready the best thing that you can do is just make it
01:57:29
really really easy remove all the friction from it get a little stand put it right next to you know your living
01:57:35
room chair or couch where it's visible Insight all you need to do is reach over
01:57:40
grab it and start it just makes it more likely you're actually going to sit down and do the work I think we've covered
01:57:46
all 10 there the last one is emphasize quantity and speed yes yes mean so early
01:57:54
on in in the process there's a tendency to like want
01:58:01
to do it perfectly sooner versus do it doing it in
01:58:08
perfectly more is actually more beneficial and so in this case you for
01:58:13
for your DJing mixing a lot of songs one to the other is going to teach you a lot more
01:58:20
than just hyperfocusing on what song A into song b and I'm going to work until
01:58:25
this is perfect you're just not going to learn as much it's the variety the exploration and the variety of
01:58:31
circumstances will teach you more about what it looks and feels and sounds like
01:58:37
than trying to get too perfect on one specific thing too quickly so like going
01:58:42
back to the the playing guitar thing like get a bunch of tabs and learn how to play a whole bunch of different songs
01:58:49
not super well because it's the commonalities that you learn between the different experiences those are the
01:58:56
things that really tune you into what's really important the foundations of the exactly like yeah what's a chord so for
01:59:05
what's a chord how do you change from one chord to another
01:59:10
um tracking beats Tempo things like that like those are the foundational skills
01:59:16
that apply across pieces of music and so if you practice those first across a wide variety of things that's just
01:59:23
optimizing that early practice around things that will stick that you you'll use a lot is there anything about the
01:59:29
subjec of learning and the first 20 hours that we've not discussed that you think is especially important to close
01:59:36
off on if someone is really that they want to learn a new skill and we're thinking about where they are and where
01:59:43
they want to get to is there anything else that you think they need to know that we haven't covered I think that
01:59:48
this duv Tales a little bit with our conversation around pon spend more of your time doing weird cool
01:59:56
things like having that that exploration budget of of really just like the
02:00:02
further a field you go the more things
02:00:08
you discover you'll find some surprising commonalities that can be very interesting and very cool um we were
02:00:16
talking about Apple earlier one of the primary design in
02:00:22
irations for for the Apple Computing system was Steve Jobs taking a random calligraphy class in
02:00:28
college and it's not something that you would put together in some sort of
02:00:34
obvious way but it was an important enough influence of being able to take
02:00:41
some part of life and like apply it in a different way in a different context to another thing that that unlocked a lot
02:00:47
of value for a lot of people and so for me like in in in the larger
02:00:56
sense I think it's just really valuable to take a step back and think about like
02:01:03
what might I want to experience or what might I want to learn how to do at some
02:01:09
point in my life just make a list could and it can be I think self-editing here
02:01:14
is is not the way to go just like make a list of all the things that that appeal to you for whatever reason and then the
02:01:23
benefit of of a an approach like the first 20 hours is it gives you a way to
02:01:30
make actually going about doing that thing look and feel far more
02:01:35
approachable than it otherwise might be when you said the thing about Apple there in Steve Jobs going to that
02:01:40
typography calligraphy class it made me it made me realize that in life there really is no such thing as a waste of
02:01:46
time no there's really not because we you know we think of oh chilling on Netflix as a waste of time
02:01:52
but you can uncover something about story arc from watching a movie that makes you bring that into your creative
02:01:59
work or into an advertising campaign and you know I think some actually it's interestingly because if you think about
02:02:05
that example you gave of Steve Jobs in that typography class had he just gone to computer programming lessons yeah
02:02:11
about how to make software or Hardware he wouldn't have stumbled across the
02:02:17
brilliant sort of insight that design and typography and calligraphy really really matters so these devices wouldn't
02:02:22
be so amazing so sometimes the most valuable skills or inspiration we can acquire exists clearly outside of the
02:02:30
bubble that we work in totally Josh we have a closing tradition
02:02:36
on this podcast where the last guest leaves a question for the next guest not knowing who they're going to leave it for oh excellent that's fun and the last
02:02:42
question that was left for you is oh they finally got some finally someone with good handwriting um I can read this
02:02:48
one without stuttering when you look back on your life are there more things you regret doing or regret not doing
02:02:56
please give some examples wow they they went heavy hitting on this one a stitch up I love
02:03:03
this stitches up the next cast no it's good
02:03:10
um I think I have more mistakes of commission things
02:03:19
I've done than m Stakes of omission or or
02:03:24
regrets so generally speaking like if I can anticipate that I'm going to regret
02:03:29
something I just try not to do that thing in the first place um
02:03:36
and I think some of those things like can can fall into like daydreamy sorts
02:03:43
of oh what would have happened if I oh yeah like hindsight yeah I mean almost
02:03:49
pure hindsight bias yeah which is also one of the things I talk about in personal NBA like it's a it's a thing so
02:03:56
um for me it is like a lot of those regrets revolve
02:04:03
around um decisions that I made that didn't work out
02:04:09
um relationships um I have I have two kids
02:04:14
and the process of of raising kids is uh hopefully informed trial and error but
02:04:21
like fundamentally trial and error and um yeah that's part of the learning and
02:04:27
the experimentation too of just like sometimes you have to make the call
02:04:33
on the Fly and sometimes you don't know whether the call you made is is the
02:04:38
right one the best one um do you have a mental model or framework for decisions generally I
02:04:47
really like my fundamental way of approaching decisions
02:04:53
is scenario planning like I really try to think through all right what are my
02:04:58
options here how much detail can I create around each of these potential
02:05:05
options what are the trade-offs are there any really like hard trade-offs things that must be accounted for and
02:05:13
then just really TR like in my current understanding try to play out what's likely to have happen down each of those
02:05:18
paths and then pick the one that seems the best or the most appropriate given
02:05:23
the circumstances Josh thank you thank you for writing two exceptionally important books and really you know I I'm a real
02:05:30
big Advocate and believer that we need more entrepreneurs in the world but more people just generally that understand
02:05:35
business even if they're going to continue to work in corporate environments because I think that's net benefit Ben I think that's net
02:05:42
beneficial to Society at large our society but also to individuals because it empowers them to have more
02:05:48
optionality in their lives to be able to make more choices about what they want to do where they want to spend their time and societies run on businesses you
02:05:55
know what we're doing now is a business um the way that I'll get home tonight is a business so understanding the
02:06:01
fundamentals the levers that are running Society I think is only net positive for everybody and that's exactly what the
02:06:06
personal NBA does it deconstructs what businesses are and it helps us understand the world around us and the
02:06:13
incentive structures of the world around us in a really really empowering way so thank you for writing a book that really
02:06:18
speaks to those people that maybe can't afford to go and get a very expensive ensive NBA one of those top schools um
02:06:23
but gives them an equally if not more important understanding of business than anything ever could it's an exceptional
02:06:29
book and I applaud you for writing it so thank you thank you very much that was very kind to say and I appreciate it
02:06:36
[Music]
02:06:51
a