Very good question. Here we go -
I saw your post offering advice help, so I thought I'd take you up on that. I'm young, pre college, so time is on my side. I'd like to create a web startup at some point in the future, at least that's the dream. Should I focus on homing in on my technical skills, or business skills? Right now, I know much less of the latter, but I recognize its importance in entrepreneurship.
Also, do you think college credentials are as important as real world opportunities? And any reading recommendations would be much obliged. I'd love to hear your thoughts.
Thanks so much,
Okay, let's get one thing out of the way first - college is totally overrated as a credential, and it's totally overrated from a skill building perspective.
It's not bad. It's good, it's fine. It's just the cost of college relative to other things is stupidly high. Some fields more or less require university training - like engineering - but for softer skills, university is totally overrated. If you can get a full ride scholarship or it's free in your country for you, sure, go to university. If it's not, well...
I mean, it still might be worth doing. I won't totally get into it here, but you can...
1. ...build most skills faster at your own pace if you're self-motivated by focusing on the core of things and avoiding rote busywork.
2. ...build much more interesting credentials with a little foresight. Someone with a degree in communications from a state school isn't going to get noticed by me at all. A Shodan in Go, someone with their scuba licenses, or even a dedicated weightlifter would all get noticed by me much more. Ditto, open source contributions in software over a CS degree for most things. Ditto, successful writing online instead of a degree in some sort of English or writing or whatever.
3. ...make money instead of spending it to get your credentials, by working in interesting places on interesting things.
Anyways, I think the concept of academia is really cool, but the execution leaves something to be desired these days. Partially the price, partially the format... it's not bad, it's just wildly overrated these days. At least, undergraduate is. I still respect original research and graduate studies a fair bit, but that's committing to a lot of academia for a decent but not incredible credential.
As for entrepreneurship - really, people make a big deal of it, but it's not so hard. You need to (1) add value to things you touch, and (2) get some share of the value you created.
That's it. How you do that is totally flexible and totally up to you. I mean, technically you can try to do (2) - grab value - without doing (1) - add value. But then you're a bandit or a parasite, and people are constantly wanting to destroy you, instead of wanting to have you in the room. I think it's safer and more consistent to add value and grab some of the value you added.
Nothing else is required to be an entrepreneur except creating value and getting some of the value you created.
Technical skills, business skills, understanding of the law, specific contacts and relationships you have, general knowledge, domain-specific knowledge... none of it is necessary. That's all means-stuff, not ends-stuff.
Back in August I wrote, "Hey you – yeah YOU – you can be an entrepreneur"
In my opinion, one of the worst and most destructive trends in Western society is that entrepreneurship has become a lionized mysterious pursuit.
There’s nothing magical about it. You get some inputs (your time, knowledge, resources, goods, whatever), you add some value to it by improving or rearranging the inputs, and you sell them for more than it cost you to get them. Profit.
The example I gave in that post is going to the store, buying some cold drinks, and setting them up sale for more money outside of a tourist attraction when it's hot outside.
I'll do that with my future kids when they're little to teach them about this stuff. Go to the discount store, buy some large packs of juice, water, sodas, maybe some light snacks, and take those to the beach. Or heck, let's get modern and technological - right now on Amazon.com you can buy a 24 pack of half-liter bottles of water for $13, including shipping.
At the beach, you could sell those for $1 or more. There you go, that's an $11 profit for five minutes of ordering and however long selling. If you could sell them at $2 per bottle (totally realistically possible, I think - these are large bottles), then you've got a $35 profit.
If you can negotiate to order 5 packs at once and pay lower shipping... well, there you go. Profits increase again.
That's all it takes. You don't need branding or marketing, you don't need an advanced knowledge of logistics or demographics or market intelligence. In fact, sometimes that stuff gets in the way of "add some value, get some of the value added." The value added in this case is transporting the water to a place where it's more desirable, scarce, and in demand. Consumers get a cold drink at a decent price, Amazon makes some coin, the company selling through Amazon makes some coin, and you make some coin. Awesome.
But okay, skills, huh? And you said web startup. Well, let's get back to the only two things you need -
1. Add or create some value somehow.
2. Get some of that value somehow.
There's a lot of ways to do that. You gotta build stuff people want to use, and go get those users. I think a pretty good place to start learning about this is from Paul Graham's essays and Steve Blank's blog. Work your way through and read everything on those two sites - those guys are so extraordinarily insight, which such a high signal:noise ratio... even the articles that don't seem related to what you're doing are worth reading, just as an example of clear thinking or good storytelling and a general mastery of language and communication.
There's a lot to creating value, but I'll defer to Mssrs. Graham and Blank on that for now... also, I just reviewed Josh Kaufman's Personal MBA which has lots on creating value and should help the gears turn.
It sounds to me like you're already on the technical path, so let's talk about one of the downfalls of that, shall we?
I see far, far too many technical people do this -
1. Create/add massive amounts of value for lots of people
2. Refuse to claim it out of some misguided reason
I just met an old friend of mine, haven't seen him in a few years. This dude is brilliant. He's, literally, a rocket scientist. He's worked on stuff that's been to space. Like, Nobel Prize in Physics consideration type work. I'm not exaggerating. Rocket scientist. Brilliant.
He's invented stuff, proved stuff, moved the world forwards a lot. Awesome guy. Great person.
We were having a conversation, and he was telling me about an idea for a thing he's going to build out for one of the universities he's affiliated with. Forgive me for being vague on details for privacy reasons, but he's building a cool resource that should bring prestige and good things to the university. There's a second component to his plan that has really high cash upside - maybe it won't, but his plan could make lots of money.
He had intended just to give this all away to the university just to get the opportunity to work on cool things with cool people and do good works.
And I'm like, "Dude, hold on a minute there. Your first thing you're doing with them, this resource... you're building it for them just in exchange for a budget." Him: "Yes." Me: "And it runs well independently of the second thing you're thinking of." Him: "Yes." Me: "Why don't you reserve rights for the second thing... you could get a big share of the cash from it?" Him: "Well, I don't care so much about the money, it's more about the -" Me: "No, I know, I get it. You want to do cool things. So why not reserve rights and agree to take a 50% split of the cash? You're the one masterminding and organizing and building everything, you ought to get compensated some... y'know, after you go to build it all out, ask for 50% of it do it, and be willing to negotiate down to 10%. This could be a couple million dollar project, that's a couple hundred thousand dollars, that'd be cool to make y'know?"
He agreed, but said he doesn't really care all that much about money, he just wants to do it. I said, well, why not do it and get 10% of the cash component? It's an awesome deal for everyone, getting 10% of the cash on your own idea that you're building seems pretty virtuous to me, yes?
But I had to really do some serious convincing of him on this. He said maybe the university would want all the rights. I said, dude, you're building something that doesn't exist for them from scratch. When you bring your initial proposal, tell them it ties into something else you're doing that you're going to reserve rights on. You could always gift them away later, even without taking a share if you really want to.
This took some serious convincing. He said he doesn't care about cash. But later we're hanging out and talking about family, and he says one of the reasons he hasn't married and had kids is he doesn't want to be forced to work on things he doesn't want to for cash to support his family.
He's spartan, he likes doing science and interesting work, and likes helping people. But he also loves kids and would be an amazing father... it's not even the time component of being a family man that would get him, it's the pressure to get cash. And I'm like, dude, those rights you're about to give away and build for someone else for free to do a good thing... that's 5-10 years of enough money to take care of your future family.
So, by all means build stuff, but please please please don't be the technical guy that gets hosed because you refuse to claim any of the value you created.
Don't be stupid or greedy. The more value you create, the smaller share of it you're able to capture. The further up the chain you go, the smaller the percent of what you're creating you get. When you pay $13 for bottled water and sell it for $48, you're looking at a cool 73% profit. But it's still only 35 bucks in your pocket.
As you move up in the world, your percent you're able to grab goes down, but you work with bigger and bigger numbers and your total amounts goes up. As a side note, this is why I don't have ads on my site here. Sure, I could probably pick a couple hundred bucks up per month, capturing a lot of that small amount of value. But I'm not not interested in a couple hundred bucks at the expense of bigger things, I'm interested in putting 5-figure deals together.
(Don't mistake this for elitism - never be above getting small amounts of money. I just have larger plans, where I'll get a much smaller percent in the building of much larger things... I think it'd still be fun to go sell bottled water though)
So yes, create value. But also get some of the value you created. A few specific skills and traits worth developing -
A fierce mastery of self - so, we're running this high level human thinking software on lizard/ape hardware. No one starts out with a mastery of self. No one.
You need to build a mastery of self. This is, at times, a painfully slow process. But it's eminently clear that if you're not in control of your thoughts, your health, your ability to focus, your emotions... if you're ignorant about your cognitive biases, your biochemistry, the systems of your body...
...well, I suppose you could still win to some extent, but it's going to be really, really hard. Stephen Covey writes in the Seven Habits of Highly Effective People that the private victory precedes the public victory. You gotta get your own house in order. Start learning about how you spend your time and harness it more. Get good habits. Get good nutrition. Study cognitive biases and rationality at LessWrong.
I know this doesn't look like business advice, but it is business advice. To be an entrepreneur, you need to create value and get some of the value you created. At least at the start, you're overwhelmingly the biggest part of this whole process. If you have greater energy, maturity, mastery of your emotions, self-awareness, better habits, etc, etc. - it's going to be a lot easier. As a side note, I do recommend Seven Habits - excellent book. I'll also recommend Brian Tracy's "The Luck Factor" on audio, it's probably got the most re-listening value to it of an audio program. Tony Robbins can be good for some stuff. LessWrong.com is excellent for learning how your mind works, and you should probably read all the sequences there at some point. Alternatively, you could start with Eliezer Yudkowsky's excellent fanfiction "Harry Potter and the Methods of Rationality" - if you're not into Harry Potter, read it anyways. Methods of Rationality is exceptional.
A love of getting cash - In full disclosure, I still don't have enough of this. Almost everyone poor has bad beliefs about money, because there's staggeringly stupidly large amounts of opportunity all over the place. If I'd followed up and followed through on basic, basic, basic obvious shit I didn't follow up on I'd be worth... no, I don't want to think about that. Ouch.
I was raised with a bit of hostility and skepticism of money, like... well, like almost everyone. This is such a god damn strange thing, but I've turned down massively obvious opportunities for no good reason. Like, it's like, it's... I can't explain it. I met a senior diplomat in the American Foreign Service in Chiang Mai, Thailand early last year. We were in an upscale cafe, he was with his beautiful Russian wife and young son. We hit it off, and talked currency and governance and politics and history for three hours.
He was just leaving the Foreign Service for industry in China, and very impressed with me, he gave me his card and really enthusiastically told me to follow up with. There was potentially massively a lot of opportunities we could have done together. And I just... didn't... follow up with him.
I don't know why. I'm still kicking myself, I threw out his card when I was cleaning a couple months later, and that was that. Why? I don't know. When opportunities come that you think are larger than you deserve, or some nonsense like that, you kind of ward them off or beat yourself down. I've gotten a number of offers for investments when I had a lot of money in the bank, and I didn't take the bulk of them. I've... I've... god, I hate even thinking about this shit. So much boneheaded non-action on my part in my life.
And you know? I've done a hell of a lot more than pretty much anyone with my background. By anyone's measure, I'm doing pretty remarkable. But I've turned down or passed over 95%+ of the opportunities I've known were good opportunities, like clear cut. Y'know, eventually you're going to find something that works at some business of yours. And if you're like most people, you won't double down on it, triple down on it. You know, you see you're getting huge ROI from an advertising source. Are you going to double your presence there, and look for related sources so you make huge bank?
Well, probably not, unless you train for it. Fall in love with the getting of money. Not necessarily the having of money, which is cool but much less important. A mentor of mine makes $200,000 a month running an architectural firm, owns property in a half-dozen countries, but he moves through most of his cash partying and buying things, and y'know what? That's okay. He loves getting money, which is enough to not miss opportunities. You don't need to love having money. I just met a commodities trader here in Kuala Lumpur who was telling me of his time driving Ferrarris and nice cars and things like that, and now he just wants to hustle cash for the thrill of getting money, and then give it away to orphanages. That's cool. That's totally cool. But do start to love the getting of money. You don't need to keep it. Hell, I'm giving away plenty of my money to charity. I'd also like to commission lots of art and science and things like that. But loving the process of getting money is, I think, the only defense against the natural timidity and toxic hostility to money. Money is cool. Learn to love getting it. I'm still working on this.
Negotiation - almost anything worth doing requires other people. Learning how to negotiate is going to have the highest ROI of anything else you could learn.
Good negotiation is not haggling, it's not about grinding someone up/down on price as much as you can. Well, I mean, that's negotiation but that's the most basic lowest level. Good negotiation is about being prepared, understanding people's needs, and exchanging things of low value to you and high value to whoever you're negotiating with, for things that are low value to them and high value to you.
Price is only a small part of most negotiations. I'd strongly recommend "Critical Conversations" as the best book I've read on negotiation. Then read like 5-10 more books on negotiation to get many different perspectives. I can't really intelligently recommend any more, because they all blend together mentally for me except Critical Conversations which stands out as the best. But I think Getting to Yes was good, and Secrets of Power Negotiation was good, and Everything is Negotiable was good, and... I can't remember the rest. I should've written this down a few years ago when I was reading all of them. Mea culpa! But really, you're not going to go wrong reading books on negotiation. Read as many of them as you can. Discuss them with other people interested in the topic.
Selling and sales - Really good for getting over your own "I'm a big deal" nonsense. I like Brian Tracy on audio again, with "The Psychology of Selling" coming down as one of my favorites. Everyone should listen to the first part about honor and not being ashamed even if you never sell anything. The tactical stuff is less interesting, but still okay. Read books on selling. Do some selling. It'll break your ego, or it'll break you. Either way, you'll have learned something.
Get over yourself - I wasn't able to start doing controversial public work until I realized that I'm not particularly a big deal, life's a circus, and getting nonsense thrown at me is totally acceptable and necessary to doing meaningful work.
Y'know, if you're not taking some serious verbal abuse, you're probably not doing anything meaningful. There's exceptions but not many. You might not realize that this is required, because many popular figures seem to not take any abuse. Ah, but people have short memories. Madonna and Steve Jobs generally get good press and most people like them these days. But they took all kinds of hell and misery in the process of getting here from there.
To get over yourself, I would recommend you study death and meditate on your death. I wouldn't recommend going out of your way to have a near death experience, but it helped me. I can still call back that young kid's scream before he hit me with his motorcycle, and then I'm lying face down on a dusty Cambodian road with my blood pooling beneath me.
So back in civilization, I write a blog post, and some random anonymous jerk writes something hostile... you know, it doesn't phase you as much. I get a fair few, "Oh har har har, this guy thinks he's going to be a "strategist" - oooh, a strategist. Har har har!" My mind tends to react quickly, thinking something like yes you idiot prick, I'm a strategist, and furthermore -- but then I stop and realize, hey, it's cool to be alive, I'm alive, I'm going to be dead somewhat shortly, life's a circus, and I should probably do some meaningful things before then.
And that helps a lot. There's two schools that help a lot for getting your mind around the fleetingness of life - the Stoics with Marcus Aurelius, Epictetus, and Seneca, and the various Bushido philosophies, of which I'd recommend the Budoshoshinshu, Hagakure, the Go Rin No Sho, and a variety of Japanese history and historical fiction. Eiji Yoshikawa, Koda Rohan, and Yukio Mishima have some good historical fiction on the samurai eras.
If you can come to the realization that life is incredibly short, you're not a particularly big deal, life is a circus, and it's worth striving for amazing things in this short life... well, I think that'll make you a better human, but also a better entrepreneur.
Oh, and learn accounting - if you wind up in university anyways, take a course on accounting while you're there. Probably business law too. Those are two areas very conducive to learning in university. You can learn contracts by having someone knowledgeable teach you outside of university, but there's lots of nuances of law that no one would think to explain if you don't get it in a classroom. Accounting is probably the absolutely best-suited course for the modern university system, because you really do learn it through rote obedient practice with no flourishes or creativity or experimental thinking. You just need to do lots of accounting to learn it. It's the most important course to take at university, because it's too boring to self-study even if you have iron willpower.
Cultivate fanatic loyalty - Go out of your way to take extremely good care of anyone that does anything right for you. This is one of the most important habits, and something successful people teach their kids, but unsuccessful people don't know at all.
If anyone does anything nice for you, really go out of your way to do 10 times as much for them. Hell, even if you deliver a business deal that makes them twice as much money as you made, then buy them a gift and thank them humbly.
This astounds people. No one does it. I can't take credit for this actually, I learned it from Judd Weiss, who it served quite well on his way to becoming a self-made millionaire from scratch at age 24 (he's 30 now). He'd put together a deal as a broker, go above and beyond the call of duty to work massively hard on it, and he'd earn a small commission while the person he was working for would make hundreds of thousands or millions. Then Judd would additionally get him a large, nice gift and say thanks. Nobody does this. It's good.
The flipside, of course, is try not to take favors from people you don't like and respect and wish to serve. I want to treat everyone well who treats me well, thus, I try not to be put in the awkward position of wanting to do right by someone I don't like. Once you get busy, anyways, there's more opportunity than can be pursued in the time you have each day, so turning down things from people you don't massively respect becomes easier and easier.
One last thought -
An adequate offering + great marketing/value-getting tends to outperform the opposite by a lot... you've got the technical inclination, so make sure you don't fall in love with engineering to the extent that you forget to get people using your product, and get some of the value you created somehow. Take 37Signals - very good products, great UI, good customer service, happy and engaged and mentally stimulated staff, and thus enthusiastic and inspired work. But really, there's equally good technological offerings as theirs, perhaps some better ones that still don't do as much business as 37S.
Why? 37Signals has adequate to good offerings, and then they do a great job at getting people to use them and getting the value for that. I could listen to David Heinemeier Hansson say in his ironic tone, "You know how our business works? We [dramatic pause] ... charge money! I know, it's revolutionary! It's amazing! But we actually make a product, and charge for the product!" Someone should mix DHH's "charge money" quotes to techno music, and every entrepreneur should listen to that track constantly. Maybe Benni Benassi + DHH. Hey, that might work... any DJs reading that want to make this happen?
Seriously though, I see highly technical people who pride themselves on being engineering whizzes knock DHH and 37Signals for hyperbole and just having adequate/good offerings. And yet, they're living in their mom's basement while DHH is racing his custom Pagani Zonda in Italy.
Very short recap -
1. Being an entrepreneur is only creating/adding value, and getting some of the value you created. Everything else is details.
2. University is overrated in teaching you how to do this, except maybe accounting and business law, or a field like engineering or medicine.
3. Selling bottled water for more than you paid on a hot day accomplishes this, and you could make decent coin doing it...
4. ...but most people won't do that, because they have screwed up views of money. Don't just build value, secure a share of the value you built.
5. Cultivating a fierce mastery of yourself helps in all other aspects of business. Private victory precedes public victory.
6. Learn to love getting money. Don't love money. Love getting money.
7. Learn how to negotiate. Read at least five books on it. Everyone should do this.
8. Get over yourself. You're not a big deal. If you think you're a big deal, you won't be able to accomplish much. Life is short, and it's a circus. Have fun and do meaningful things while you're here.
9. Be fanatically loyal. It's hard to go overboard here, so long as your loyalty is to people who consistently treat you very well.
10. Adequate value-delivery + excellent share of keeping the value consistently outperforms the opposite way.
My, that was a long post. I'd love to hear feedback, book recommendations, blog recommendations, and skill recommendations in the comments from readers. What worked for you when developing your entrepreneurial skill?
Man, with this post, you`re delivering tons and tons of value.
Not just the article is good, but the recommendatios as well.
I`m gonna follow your texts, now.I landed here by a friend recommendation.
Soon I`ll get in touch by email.
On getting your own house in order:
Where would I possibly find enough leather
With which to cover the surface of the earth?
But leather on the soles of my shoes
Is equivalent to covering the earth with it.
Likewise it is not possible for me
To restrain the external course of things
But should I restrain this mind of mine
What would be the need to restrain all else?
Hey Aki, welcome in the Jing! We (coworking group) are organizing an entrepreneur drink this Thursday 20 January 2011 at 7.30pm at Paddy O'Shea's (Irish bar at Dongzhimen). Join an meet us~ You can contact me at carole.waihai[at]gmail.com
What a coincidence -- I just arrived in Beijing tonight. Sadly, I'll only be here until Wednesday.
I'd love to find out more about the startup communities here. May I reach out to you?
Great Post Sebastian, thanks for sharing all these ressources! It is good to read an entrepreneur's blog who is not in the Valley for once! I think entrepreneurship is quite well-spred in the worlwide expat community, I hope to see more blog like yours.
I found your blog with the Startup Digest reading list and will definitely check it out deeplier~
Come and say hi in Beijing sometimes! The start-ups community is building up, it is very interesting to watch!
I haven't checked your site in many weeks, and now I regret it cuz you've got so much great content here. The rate at which you churn all this stuff out is astounding, as well.
I absolutely love this post, especially the parts about "Getting over yourself" and "Be fanatically loyal." I think you put those two concepts--especially the former--in a refreshingly clear way.
Inspiring on so many levels!
Fantastic post, much respect, but two comments:
Skipping Uni introduces the risk that one fails to grasp the interconnected nature of things in the world. Thus, you may become smart at entrepreneurship but weak at life.
Also, there are a variety of interesting and engaging careers available out of school. The stereotypical large corporation is not the only option.
Again, otherwise great post.
Great post Sebastian. I'm amazed by the extensive covering of the topics you discuss in your posts (Which is rare in blogs). I'm more amazed how you find time to write this kind of posts in so vast quantity.
Here's my two cents for entrepreneurship advice:
- Stop reading and go executing/planning your idea. Books, blogs, news, gossip are not necessary for your business to succeed. While right choice of influences(Books, People, Blogs) can accelerate or transform your business, it does not make it happen by itself. The hunger for knowledge grows while eating and it can keep you "active" literally forever. Consume it wisely.
- Test your ideas. Spend few hundred bucks on adwords, make calls to clients, sell preorders. Anything that validates or gives you some ground for your assumptions. You will save money on the long run. Try to reach the most targeted demographic you assume would be attracted to your product/service. E.g before hiring 10 high-school kids to sell water/soda in beaches go do it yourself for one day/week. This allows you to base calculations of sales(drop of sales because of weather), ROI etc. etc. on something much more than a assumption. Many other benefits as well.
- Learn to take risks. The things you fear most are usually the things you should pursue. Think what's the worst thing that could happen to you. Failure tends to lead to new contacts, lessons learned, new ideas etc etc.
Web business tips:
- Charge money. Venture capital deals and sold businesses on vanity numbers are no often one in a million game. Against any intuition higher price can increase your sales also.
- Test everything(website optimizer). Changing the title of your site or button color can drive conversions up. Combination of these increases will add up.
Could go forever with this. But definitely I would avoid learning economics, accounting(Richard Branson couldn't differentiate net and gross profit still in his 50's) or anything that is boring, bureaucratic and doesn't have direct effect on increasing(sales/profit) your business.
Was having lunch today with a friend of mine who is a fantastically entrepreneurial, smart, skilled, massively hard-working, and has done some amazing things in his life.
But lately, his cash has dried up.
We talked about it, and it turns out he's doing something mentally that I did quite a lot in the past -- often to my detriment.
I was focused on doing "very high value activities" -- by some abstract standard of my own -- and often neglected to get what seemed like small amounts of cash.
My friend is doing the same thing. He's looking for "streams of income"; not "just getting some cash."
I remember reading about the famous marshmallow study, the one where they see if kids can delay gratification or not. Reading about it really haunted me, because a psychologist came to my school in third grade and did a similar experiment on us students. We could have an unspecified "big prize" later, or a small prize immediately. I walked away with silly putty.
As you probably know, the people who delay gratification are more successful, happier, etc. When I found this out, I became determined to be a gratification delayer.
I love thinking about these dichotomies-- you're either X or Y, and if you're Y... maybe you'd better start becoming an X.
A related one that I think is really practical is the split between builders and allocators. I'm not sure those are the exact best words, but I've always been bad at coming up with catchy terms for these things.