347-878-3837

Business

Here are articles on Business

Craft strategy from both inside and outside

Craft strategy from both inside and outside

The economic playing field has gotten complicated enough that it’s foolish to step on the field without some idea of how you’re going to win. In sports, you have a playbook, which lists the plays you can make. In business, we call these “tactics.” You also need a strategy, a way to combine those plays so you win the game. While it’s possible to win without a formal strategy, having a good strategy can often give you a leg up. You’ll form the best strategy by looking both inward and outside.

Look inwards to your resources

Looking inwards tells you what you have to work with. Your strategy must deploy your resources to get the most from them. The book Top Management Strategy: What It Is And How to Make it Work by Tregoe and Zimmerman is my favorite book about creating at internal strategy. They list out twelve different ways you can concentrate your efforts.

For example, you may have invented an electric car that you sell to shipping companies. That’s given you expertise in creating electric cars, and you have expertise selling to shipping companies. You can grow your business by concentrating on bringing your technological expertise (electric cars) to new markets. You can also grow your business by developing new products to sell to shipping companies. In the first case, you’re organizing your strategy around your technology. In the second, you’re organizing around a particular set of customers. Which you decide to do is entirely up to you.

When I worked at Babson College in the team formulating the strategy of the school, Babson was ranked the #1 school for entrepreneurship, world-wide. This gave us an explicit decision: do we ignore the ranking, and (try to) build some other brand for the school, or do we concentrate in entrepreneurship. Babson chose to continue building on entrepreneurship. It didn’t have to, however. Making the choice explicit led to initiatives that would never have happened without that self-examination.

Look outwards to the environment

Great resources aren’t enough. You might have the biggest bank account in your industry, but if your competitor also owns your industry’s largest distributor, you’re going to get creamed. Your landscape determines which (if any) of your resources can help you win.

The most famous model for understanding the strategy landscape for crafting your business strategy is Michael Porter’s “Five Forces” model. My favorite is a later extension of Porter’s model, the “value net,” presented in the excellent book Co-opetition by Adam Brandenburger and Barry Nalebuff. With a value net, you look at the world around you: competitors, substitutes, suppliers, customers, complementors, and barriers to entry. You design your strategy taking into account what each part of your value net brings to the table, and how that meshes with your business goals.

For example, your industry might be dominated by two or three suppliers. That gives the suppliers tremendous negotiating leverage, and the ability to cut you out of the market if you don’t agree to their demands. Furthermore, it makes your business vulnerable if one of the suppliers encounters a disruption, since you don’t have many alternatives.

Good business strategy sometimes happens by magic, but you don’t want to bet the farm on Tinkerbell being in the right place, at the right time. Formulate your strategy by deciding how you can best deploy your internal resources given how your industry’s value net looks today. Times change quickly these days, and an integrated approach to keeping your strategy current will keep you at the top of your game.

How to streamline your paper flow while traveling

How to streamline your paper flow while traveling

This blog post was sponsored by Adobe Document Cloud.

I know in my gut that business travel is what drives the paper industry’s profitability. Every step you take ends up producing a receipt, business card, or some important note scribbled on a napkin, in the hope it will become the Next Big Thing. Then you’re supposed to sort out this massive pile of former trees and report it. Yeah, right. Sorting expense report receipts is really high on everyone’s list of “most favorite task, ever.”

Though I often consider smartphones to be drains on productivity, taming the travel paper flow is one place they really shine. I love using “scanning apps”, like Adobe Scan to keep my travel paperwork completely sorted out from the start.

Adobe Scan takes a picture of a document, lets you crop it, and turns it into a fully searchable and editable PDF. You can organize several scans into one PDF document, and organize the PDFs into folders.

Use Scanning to Manage Your Receipts

Save your receipts throughout the day. When you get a receipt, jot down on the receipt what it was for, who you were with, and so on (which you need to do anyway). When you return to your room at the end of the day, you’ll get out all your saved receipts and super quickly deal with them once and for all.

Make a summary page. Total up the receipts into categories—how much you spent on food, how much on transportation, etc. Grab a blank piece of paper, write the date, and the summary of the categories.

Then open your scanning app, and snap a quick scan of the cover sheet with the totals, followed by the receipts. Your app will detect the pages, correct for perspective, and save it all in a PDF document. Include today’s date in the filename.

Voila! You now have a single PDF with today’s receipts already scanned and totaled, with the details noted on each receipt. If you have to fill out a separate expense report later, you’ve already done the totaling by category, and each PDF separates out a separate day. You don’t need to wait until the end of the day to scan your receipts. You can add each new receipt to your existing PDF, and then create your cover page at the end of the day and add it to the start of your file.

Adobe Scan’s optical character recognition makes your PDF searchable by any text mentioned on the receipts. This is a huge plus that you’ll appreciate later. When you need to go directly to an expense, just search for the name of the company on the receipt, and it will pop right up.

Organize by expense category. Depending on your reporting requirements, rather than organizing your scans by date, you might put all the receipts of one type into the same PDF. For example, you might want all your transportation receipts in one document, and all your meal receipts in another.

In this case, the easiest course of action is to sort your receipts as you get them, and save them up to scan them all at once. At the end of your trip, create a cover sheet with each category and its totals, and scan the cover sheet and all the receipts in that category.

Capture maps

Since you’re often in unfamiliar territory—a conference center, hotel, or corporate campus—you need to know how to get around. When you spot a map of the facility, scan it. Often the facility maps are on a wall, or printed in a book that’s inconvenient to carry around. But the filtering included in a scanning app can often give you a good-quality map even if you snap it off the hotel wall or out of a conference book.

Use Scanning for Conference Notes and Directions

You’re often traveling for meetings or learning. Doing a good job means having real engagement, with your attention focused on what’s going on around you, not on wrestling with your technology. If you take notes you’ll learn the material farbetter taking notes by hand on paper. You can keep more of your attention on whoever’s speaking, and you engage more of your brain in learning and participating. So do that! Take your notes on paper. At the top of each sheet, write a few keywords so you can glance at the top of the sheet and know what’s on it.

At the end of a session, scan your notes into a single PDF for the session. You can then pull the scanned sheets into Acrobat to annotate it as needed, adding circles, arrows, highlights, and anything else that will help pull your attention to the most important areas.

If you aren’t using a scanning app to organize your paper flow as you travel, grab one now. Tame your receipts and your business cards, so you can spend more time on substance, and less on administrivia.

Cryptocurrencies for Investors and Entrepreneurs

Cryptocurrencies for Investors and Entrepreneurs

How ICOs and Cryptocurrencies Work for Entrepreneurs and Investors

With Bitcoin and cryptocurrencies all the rage, I was recently invited to participate in an ICO (an “initial coin offering”). Warren Buffett made his fortune by limiting his investments to businesses and investments he understood deeply. That seems sensible, so I’ve been delving into the ICO world to understand if it’s for real, if it’s a scam, or if it’s something genuinely new.

Much to my surprise, it doesn’t seem to be a complete scam. ICOs are a fund-raising play for a business. Coin-based entrepreneurship has aspects of equity, and aspects of … something new. It decouples the value of the organization from profit. If it’s sustainable, coin-based organizations could become a way to create markets whose bottom line is genuine societal value. The “triple-bottom line” could be an actual market reality. That’s exciting!!

Or, it could turn be unsustainable, and a fancy way for unskilled or unethical entrepreneurs to walk away with lots of investor cash and no obligation to do anything with it.

As you’ll read below, while the ICO mechanism has been invented in the context of crypto currencies, there’s no inherent reason that this has to be done with cryptography. The same structures could be put in place in the physical world, without needing to buy into blockchain or virtual currencies.

What I’ve Learned so Far About ICOs

Here’s my current understanding of “coins” and initial coin offerings (ICOs). While the concepts are being developed in the context of crypto currencies, as I mention below, they can be (and have been) implemented in ways that are totally independent of crypto, or even computers.

PLEASE CRITIQUE AND COMMENT! This understanding is about two or three hours old, so it’s my very first attempt to understand.

ICOs make a different bet than stock investments

The ICO model is fascinating. Instead of betting on the success of a company, as you would with a traditional corporation, you’re betting on the creation of a market. The entrepreneur is then pitching their ability to create a market for the coin, which can be done in many different ways, depending on the company issuing coins.

This means that an ICO has two cases to analyze. While a traditional startup only needs to make a business case, an ICO needs to make a case for the creation of the coin market, and a case for the success (however that’s defined) of the organization being funded with the ICO.

There must be a market-making mechanism

The entrepreneur needs to present a compelling case:

  • that their endeavor can create a market
  • that the market created makes sense (that there’s a reason want the coin)
  • that there’s a way coins are exchanged for dollars or other value that is valuable enough that people will want to trade the coins

The primary function of the business being financed with the ICO is to create a market for the coins, rather than to make an economic profit. For example, an organization issuing an ICO may not do anything on an ongoing basis, as long as they can kick-start the market for their coin.

(There’s no inherent reason that any of this has to involve blockchain or crypto, by the way. You could be issuing frequent flyer points that are tracked in a spreadsheet in an “IFFPO” and it would basically be the same thing.)

For example, an airline could simply rename their frequent flyer points as “coins” and sell a bunch of those coins rather than issuing stock. People would want the coins because they could be exchanged for flights. If the only way to fly were by paying in frequent flyer points, then the market for the points would be created by anyone who wants to travel by air. Frequent flyer points would then be convertible to and from dollars based on the price in coins the airline charges for a flight, and the overall market demand for air travel.

But the airline would not rise and fall based on its ability to generate a profit; it would rise and fall based on its ability to keep the market for FFCs boosted. It would then presumably pay its employees in FFCs, which they could convert to cash.

Coin-based financing may resemble ongoing equity financing

This scenario resembles a company that is financing itself on the strength of its equity, by selling stock to pay any ongoing expenses, rather than financing itself on its underlying business fundamentals.

For an airline, which needs to pay salaries and has high ongoing expenses, it probably wouldn’t work. But as Amazon shows, a company can consistently generate lackluster business results and have its “coins” (shares of AMZN stock) continue to be valued quite highly.

Coins can fund one-time projects as long as they create ongoing markets

The thing about coins is that the organization that did the ICO might not be an ongoing business at all, but a one-time fund raise, as long as it kick starts the market. For example, if the coins created are done so as the only currency that can be used to access some resource, like time on the Hubble telescope, then one organization can create the coins and the protocol that requires them, while completely separate organizations accept the coins and thus generate demand for them.

[One historical example that comes to mind is the currency of green stamps, which survived for decades but eventually failed. An ICO could be likened to an Initial Green Stamp Offering.]

Coins dilute … the market

Coins are like equity in that issuing additional coins dilutes the value of the coins already in circulation. The one ICO I’ve seen closely puts a cap on the number of coins that can ever be issued, to preserve the coin scarcity. That makes sense for an ICO that finances a one-time, transient organization. But if coins will be used, rather than profit, as an ongoing source of an organization’s funds, then having a hard cap on the number of coins will put a cap on the total amount the organization can raise over its lifetime.

In the social enterprise world, coins could be issued to finance social good, as long as there were some mechanism to drive the demand and market for the coins. Rather than having social enterprise rely on constant begging, a social enterprise could drive demand for their coins by striking agreements with businesses or other organizations to use the social coins as a currency. To fund a social enterprise for years on coins, however, would require a substantial initial ICO or the ability to keep issuing coins when funds are needed, so the coin used for the funding probably shouldn’t be capped.

It’s fascinating! And I have no idea how to value a coin, or whether this will prove to be sustainable in any meaningful way.

Safety warning: if you use Skype, your contacts may now be exposed

UPDATE: February 14, 2019: Since writing this article in late 2017, Microsoft seems to have made a change that makes it a bit harder to reverse engineer someone’s address book, but most of the problem remains. You can read my update on how Skype still exposes your contacts in problematic ways.


A quick public service announcement for anyone who uses Skype. Executives, VCs, journalists, researchers, and anyone who cares about the privacy of their contact list should read this.

I don’t usually post about computer security, but in this case, it seemed quite serious. It’s also the kind of thing we’re used to from Facebook and LinkedIn. But it could have very serious consequences, since people use Skype differently from those social platforms. People use social media with an expectation of public transparency, while many use Skype with an expectation of privacy.

As of a couple of days ago, the new Skype tells other people how many contacts you have in common. It also offers your contacts as potential new contacts to everyone else in your contact book. This is a surprisingly serious privacy breach.

This means if you use Skype for anything where your contact list is sensitive (conference calls with clients, planning a protest over the skyrocketing price of kitty litter, coordinating your monthly meeting of people relax by knitting exciting underwear), your contacts can quite possibly deduce who other contacts are. Furthermore, if they know about this new “feature,” they can make some smart deductions.

For example, you’re a mergers & acquisitions consultant. You are in talks with MergeMe, Inc. A prospect from WeMergeToo calls you. Immediately after you accept their contact request, they start seeing suggestions that they might know the MergeMe Inc CEO. They don’t, but they know they just connected to you —> they can quickly figure out MergeMe Inc is talking with you also.

I also just discovered I can look up a profile of someone I don’t know (they’re neither a contact nor a friend), log out and back in, and Skype will start suggesting their contacts to me as potential contacts of my own. (I can tell because those contacts have the same last name, physical resemblance, etc.) So this can be used by stalkers, bullies, harassers, and people who wish to research someone and learn who they know.

(This feature can be used for much more targeted research. I won’t go into details here. Suffice to say that you can get pretty specific.)

Microsoft’s support page says they’re considering changing this behavior someday. Of course, by that time, much damage will have been done.

I went through and deleted some of my contacts by hand this morning (it takes forever… in a triumph of “good for Microsoft, bad for the user” they make it super easy for you to give them your social graph, and super hard for you to take it back). Even deleted, Skype kept suggesting prior contacts to me. That suggests that they continue to keep that data — and probably call history and chat history as well — for use in “helpfully” building their social graph.

Important note: deleting your contact book isn’t enough. If your associates have you in their contact book, someone can still use the same mechanism to figure out the connection.

My reaction was to cancel my Skype account altogether. But because Microsoft cares so much about me, the best I can do is schedule it to be closed in 60 days. So for the next 60 days, like it or not, my contacts are going to continue to be exposed.

See: the Microsoft Skype support article

Also note Danida_U’s response from Microsoft: there’s no way to disable this short of opting out from being contactable at all. And no, there are no plans to remove the “feature.” They want to make it easier for friends and family to find you. My suggestion: if you want your friends and family to find you, tell them your Skype ID. Problem solved.

I recommend http://zoom.us or http://appear.in as alternatives that don’t “help” you by exposing your contacts to the world.

Why business models matter: Understanding health insurance

When you’re making business decisions, one of your most powerful tools is to understand business models. A business model is, simply, how a company makes money. If you want an in-depth definition with examples, check out my article on business models that was written during the first internet bubble, back when PayPal was a startup, Amazon only sold books, and cameras still used film. Almost every example in the article has since captured its market or gone out of business. (Challenge goal: read the article and consider how the companies’ business models did or didn’t change, and how that led to success or doom. Hindsight is a powerful learning tool!)

Become a compulsive business model collector

Often, a company’s business model constrains what it can and can not do. That, in turn, gives it strengths and weaknesses. Learning to spot business models, and do quick back-of-the-envelope calculations on them, will help you become a ninja at spotting opportunity.

When you see a hot pretzel vendor at a ballgame, ask yourself: what’s that person’s business model? How do they make money? How much product or service do they need to sell to make that money? How much does it cost them to make it? Is it a good business? Hot pretzels being one of my favorite foods as a college student, I was astonished to learn that the hot pretzel vendor cleared a six-figure income.

When you pass the neighborhood bookstore, ask how they stay in business? What’s their business model? Why does it work for them, and not for the bookstore down the block that went out of business five years ago?

When you use Facebook, ask and consider: what’s their business model, and what does that imply about the actions they’ll take? Or eBay? Or Uber?

Business models give policy insights

In a recent Facebook flame war, we were discussing different kinds of health insurance systems. Understanding the business model of an insurance company might give you some insight into their incentives and potential actions:

Health insurance companies make money through underwriting profits (premiums minus payouts and expenses) and investment income on the premiums they collect.

Insurance must ALWAYS be priced higher than needed to pay out because all that administrative overhead, salaries and buildings, needs to be covered.

Furthermore, a for-profit insurance company wants to grow profits. That means raising revenues and/or cutting costs.

How can they cut costs? By streamlining operations and finding ways to avoid paying out on existing policies.

How can they raise revenues? By increasing premiums above what’s necessary to pay out on their pool of premiums.

(They can also find ways to increase their investment income, but that’s longer-term and much less under their control. They can even play in the the $1.2 quadrillion derivatives market, which no one really understands, and Warren Buffett considers a ‘Weapon of Mass Destruction’.)

Now, when we formulate our own opinions about healthcare policy (which we all do, rather than simply parroting our favorite pundit, right?), we can at least understand that the business model of insurance companies constrains their actions.

Your assignment:

Every time you interact with a business today, ask yourself:

  1. How do they make money? Where does their cash come from?
  2. In order to make that money, how much do they have to spend, and from where?
  3. What are the levers that their business models allows? What are the risks and benefits of their model?

Pretty soon, you’ll discover you can spot opportunities to bring business models to places they’ve never been used. Often, you’ll discover there’s a reason they weren’t used there. But other times, you’ll find that a shift in business model just might make you the next PayPal.

If you want to read more about [my thoughts on the insurance example implications, keep reading…

Health Insurance Business Models Drive Policy

IMPORTANT DISCLAIMER: This is intended as an example of how understanding a business model leads to confidence in predicting the behaviors of people who use that model. This post reflects my layman’s understanding of insurance business models. If anyone knows better, please please correct me.

For you gentle readers who also don’t know the inner workings of the industry, read this to understand how a business model leads to predictions of behavior. Do not read this for accurate information about the insurance industry.

For-profit health insurance companies must overcharge

I’m guessing that competition will not produce efficient health insurance. Health insurance companies make money only two ways: through underwriting profits (premiums minus payouts and expenses) and investment income on the generated float.

Insurance will always be priced higher than needed to pay out because all that administrative overhead, salaries and buildings, needs to be covered.

Furthermore, as long as we have a market that defines “healthy” profits as profits that grow yearly, there will be ever-increasing pressure to raise profits. That means raising revenues and cutting costs.

You can only cut costs so far on the admin side. But you can reduce your payouts by writing ever more complicated policies that in fact cover less and less. You can also challenge payouts, make the reimbursement process deliberately more cumbersome, lower the ceilings of what you will cover, etc.

And of course, regulation caps permitting, you can always raise revenue by raising premium prices.

Every year, due to the market expectation of continually growing profits, all these forces will come into play. (Premium prices will rise, and people will blame Obamacare or the lack of Obamacare or greed or whatever. It’s just the way growth-oriented markets work.)

Any for-profit insurance company will feel all those forces as a simple matter of doing business. So any for-profit insurance company in a competitive market will be pressured over time to do these things.

Even if their investment income is reliably positive, they can’t control that nearly as quickly, easily, and reliably as all these other forces. And if the company is heavily invested in derivatives (which Warren Buffett calls “Weapons of Mass Destruction”), well, at some point there may be a “correction.”

There are competitive pressures at play, as well. Price wars. When a competitor lowers premium prices below the actual rational value for a given policy, a company is pressured to match that pride and write unprofitable policies in order to compete … resulting in pressure to make up profits from one of the other sources1.

That’s why private mutual insurance companies are a good thing. They still have these pressures, but at least the policyholders own the company so the company’s goals are more aligned with the goals of its members.


  1. This is one source of Warren Buffett’s wealth. When he acquire an insurance company, he gives them permission to stop pricing policies below expected payout values, even if there’s a competitive price war going on. ↩︎

Mind Reading for Fun and Profit!

Want followers? Want to get more from a negotiation than you go in expecting? Want more loyal relationships with your employees? Want people to be committed to your cause? Want deeper friendships and romantic relationships?

Empathy is the key. It’s the ability to understand what another person is feeling, even if their situation is unlike yours. Empathy is the foundation for relationships, for anticipating others’ needs, for anticipating hot buttons, and for being able to help others. It’s even where great inventions and innovations come from—understanding someone else’s world so thoroughly that you solve problems they didn’t even realize were solvable.

Empathy is a skill, and it can be learned. It’s usually learned face-to-face, but in the wonderful world of technology, we don’t get nearly as much facetime as we once did. But it’s still possible to learn and exercise your empathy skills, explicitly.

We’ll use gender and race as examples, because we can all find someone of different gender and race, and this exercise will help us glimpse into their very different worlds.

In day-to-day empathy, you can even use this with very similar people. Because even people from very similar circumstances can have dramatically different experiences.

Their reality may not be directly knowable

My female friend Vinda told me she never walks home alone after 11 pm. I scoffed. I’d lived in that neighborhood for over ten years. We’d even walked home together. It was perfectly safe… no catcalling, harassment, or anything. Ten years.

I began casually asking women who lived in that neighborhood if they walked home alone. My friend Lauren is a black belt. I asked her, and she looked at me as if I was nuts. “Of course. I’ve always had to do that. All women do that. Why do you ask?”

That’s when I realized that my life as a man is fundamentally different from my friends’ lives as women. When I’m with them, the world is one way. When they’re alone, it’s different. And it isn’t knowable by me, because my very presence changes it.

Find out about their life

Ask them about their life. Let them tell you, and trust the answers. This exercise isn’t about deciding whether you agree with them; this is about learning how they experience their life, from their perspective. Ask them to tell you about what it’s like to be at home, at work. What do they worry about? What do they take for granted? Where do they feel safe? Unsafe? Loved? Ignored? Noticed?

If you have an opportunity to learn about and observe their life directly, take it.

Imagine their life from outside

Once you have an idea of their life, make a mental movie of what their life is, as reported by them or as you’ve seen it first-hand. Things to consider:

  • What is it like to live in their neighborhood? Their apartment? Work in their office? What is their commute like?
  • Who are their friends? What do they do together? What clothes do they wear? What do they do for fun?
  • How do other people treat them on a daily basis?
  • What do they worry about? What are they confident about?

For a short time, I was a “Big Brother” in the Big Brothers / Big Sisters program. My “Little Brother” was an African-American boy. When we would walk down the street together, people would turn and stare. Pretty much everywhere. It was a freaky experience for me, as I’d never experienced that. As a black boy, he experiences that every single time he walks through a predominantly white neighborhood.

I imagined what it’s like to live his life. Where he’s never experienced walking through a group of white people without having them look at you with curiosity or suspicion. Where the only people he can relax with are people of color, with cultural norms, language, hopes, and fears that aren’t the same as white people.

Now, take their perspective, literally

Now that you’ve got the movie of their life, rewind it, and mentally step into it, so you’re looking through their eyes. Roll the movie, and notice what their experience is like. The notice the feelings that you/they have as they live that experience.

In one of my more dramatic examples, I was talking with a friend who had said “Yes” when they meant “No,” and ended up doing drugs they really didn’t want to do. My friend explained how important it was to be liked by the group. And in that situation, from their perspective, they thought saying “No” would make them look scared and foolish in front of their friends.

Succumbing to peer pressure is really not a big issue for me. So I decided to empathize.

I imagined the scene from the outside: a group of friends sitting around in a circle, passing around drug paraphernalia. Everyone’s laughing and joking, and saying, “C’mon, just give it a try. We’re all doing it; it’s fine.” I imagine my friend cringing back, but nevertheless accepting and taking the drug.

Stepping into the movie. I suddenly felt a clenching in my chest. A thought came to mind: “I really don’t want to do this, but if I don’t, I’ll be an outsider. They’ll stop inviting me places. I’ll be all alone.” My friend’s fear, longing, and conflict; it all became real to me in that moment.

Your results will vary; that’s a good thing!

Empathy is individual. My Little Brother’s experience may not apply to all black people. Maybe just black men. Or maybe just him. And maybe my imagination of what it’s like to have all eyes watching distrustfully is nothing like the way he experiences it. You can always describe your experience and ask. With practice, you’ll get better at it. We all have the ability to feel empathy Your brain is built to make this work.

Give it a shot

There are a lot of chances to practice this empathy technique. Start with friends and family members, people you already know well. Then branch out. Try someone of a different race or religion. Try someone of a different race or gender. Try someone on the opposite side of a political issue. Try someone of a very different socioeconomic class.

This will be a stretch. You’ll need to learn something about the other person’s situation in order to gain the insight. While you can still get a surprising amount of benefit by simply constructing your own idea of what their life is like, you’ll get the most by seeking out the other person, asking questions, and listening. You won’t be listening to engage or react, however, but to learn. And to trust that, at least during this exercise, they’re reporting their real experience to you.

Empathy is the foundation for human relationships. It’s what lets us build bridges to people who aren’t like us, and even to people who are. Take the time to build your empathy muscles explicitly.

The Fourth Circle of Focus: Scaleability

In my article on focusing your life around what you’re good at, what’s needed, what you love, and what’s scaleable, the “what’s scaleable” is a piece that’s new to me, and may be new to you. It’s worth talking about, though.

Four intersecting circles

The Myth of Hard Work says that if you work hard, you’ll get ahead. And if you work harder, you’ll get aheader. If you work super-hard, you’ll be Bill Gates. (And if you work hardest of them all, you’ll be Batman.) Sadly, that’s wrong.

The Industrial Revolution enabled fortunes to be made because it allowed scale. A lone blacksmith could only make a single horseshoe an hour. In a horseshoe factory, however, a lone machine operator can make dozens of horseshoes an hour. What makes the riches possible is that machines and technology allow us to scale.

Scaleability matters to whatever you do

When I’m working with a coaching client around any project that involves a lot of people (generally it’s a business), we often spend some time honing in on scaleability. The business buzzword “leverage” comes into play here. We look for ways they can scale their results without scaling the work and cost to the same degree.

Some businesses don’t scale well at all. To add one more diner’s worth of revenue, a restaurant needs more kitchen capacity, more food, more server capacity, and time to cook that diner’s meal. Some of those elements can be squeezed out. By offering a limited meal, cooking in advance, and dispensing with servers, fast food restaurants can serve more customers with fewer resources. But even so, scaling still requires a lot of effort and systems.

The internet allows unprecedented scale

The internet’s joys and woes come from the fact that it makes new kinds of scale possible. Craigslist, a single website, can handle all the classified ads. All of them.

How does your business scale? In non-information company, growing a business requires resources up front. If Ben and Jerry’s wants to add a new product like Oreo Ice Cream cake, they have to buy honkin’ truckloads of Oreos, then find customers for all that delicious Oreo goodness.

But in information businesses, growth happens by reaching more people.

How the internet enables scale

Before the internet, some people who sold information sold it in physical form, books and reports. Scaling required more physical resources. Other people sold it electronically, but charged for the access points. Bloomberg made his billions by renting out Bloomberg terminals, over which he was able to cheaply send his real product, the information.

The internet provides a common access point that anyone can use: the web. And everyone already has the physical stuff they need to read the information, monitors and computers. So internet businesses don’t require hard, upfront investment to scale.

That’s why, when revising our company strategy, we shifted from a coaching-driven model to an online course driven model. It fulfills that fourth circle. It scales better.

A 20-minute video about online businesses and scale

I’m helping my mentor Danny Iny achieve scale by introducing him and his products to my list. I happen to believe very strongly in him and what he has to say, so we’ve become affiliates. We introduce each others’ products and services to our audiences, allowing us to reach more people without the kind of investment that would be needed for a traditional business to scale. (WalMart, for instance, grows by having to buy or rent a new store location. Then they have to sweep it. And then hang curtains. And get the utilities connected… Who wants to work that much?)

Danny has a video that lays out the fundamentals of why online businesses are a good thing from a business perspective. Danny grew a seven figure business in just a couple of years, and I’ve found his grasp of business to be superb.

Danny’s video explains the fundamentals of online business. You can check it out here: