Every business has five parts: value creation, marketing, sales, value delivery, and finance. Josh Kaufman's *Personal MBA* explains these, emphasizing that understanding them is a superpower. Marketing taps into five human drives (acquire, bond, learn, feel, defend). Success requires focusing on unmet needs, iterative experimentation, and understanding customer psychology. While MBAs are popular, a deep understanding of business fundamentals is more valuable than a degree. book though first 20 hours yeah the first 20 hours how to learn anything and you have a TED talk don't you which was crazy yeah crazy crazy I don't know if it's hit 40 million views yet but PR pretty close if not 40 million views on a TED talk about the first 20 hours how to learn anything 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 talks of all time yes that's crazy yes I did a TED talk nobody nobody watched it I did like t talk are fun they're very fun um yeah so so the T talk for the first 20 hours did did very well. And I think I think part of it has to do with it's something we all have in common, right? Like wanting or needing to learn something necessary, Useful fun. Cool. Not 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 conflicting desire there of like, yeah, I want I want to learn this, but I I don't have a whole a lot of capacity to spare here. Um, and then the the genesis of the book was was digging into some of the psychology research that I that I uncovered in the process of working on personal MBA, which was all about learning new things and learning that the first few hours of acquiring or learning any particular skill are validated by research to be both the most effective and the most efficient. So, like your rate of improvement per time of, of, uh, or per unit of time and energy invested at the very beginning of learning something new is extremely high. And so, the question that that sparked the research for the first 20 hours is, is there a way that we can take advantage of that consciously? Like, is there a way that we can be very conscious and deliberate about how we approach the process of learning something new to make, to, to, to reap the maximum rewards from that early stage of learning something that you're not familiar with, and how good can we get in in that early, early window? And in my research, you can go from, from knowing absolutely nothing about something to being reasonably good in much less time than, than you would expect. So in my experience, that's about 20 hours of focused deliberate practice. 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 hours. I mean, this is everyone uses this phrase in in society. They say, have you done your 10,000 hours? So you're telling me it's actually 20 hours is the key. I'm saying different goals based on different objectives. So, um, K. Andrew Ericson was the researcher behind the the 10,000 hour rule. And I think what's important to to understand about that as a general guideline is those studies were focused on mastery of very competitive performance oriented activities. So call it. So the original studies were done, um, with correlating practice hours to how high a position do you have in like the first violin and an orchestra sort of thing. And there was a correlation between, like, how much do you practice? How good to you get? that's all well and good. And yeah, generally speaking, the more deliberate practice that that you have on on a certain thing, the, the better you are. That is a true thing to me me, I think it's valuable to shift the spotlight from mastery, which is very flashy, very high status, people who are extremely skilled at things, have a lot of energy and attention around them. That's great. um, the type of skill acquisition that most of us do most often throughout our entire lifespan is figure out how to do something new for the first time, like Dejing For me. Exactly. Yeah. So how do I do that? Then, know you talk about these 10 major principles of rapid skill acquisition. sure, where I can learn anything in 20 hours. What are the most important elements of this that I need to know about? If I'm someone who, maybe, 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 learn how to do it. Yeah. the best way to approach this is, um, there's a set of five recommendations that, that, that go in order. And the first is like deciding exactly what it is that you're trying to do. So in my experience, like a lot of people, when they, at the beginning of the process of learning how to do something, the goal is way too big. like it's way too much way too soon, um, whereas something, something specific concrete and approachable is a way better place to start. So, um, Dejing, an entire set at a crazy music festival is not the place to set the goal right at the very beginning. It's I want to do my first song for myself for me. It was like I want to mix 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 thing. I know exactly what it looks like. You probably had some experience 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 bit of like taste context perspective and so deciding like okay my early goal is to do this one specific thing. It's the first failure mode because most people don't decide on that concrete specific thing. It's way, way too way too nebulous. There's not enough to work with. So deciding is the first part from there. Most of the things that we we talk about as skills aren't single skills. they're actually bundles of smaller subskills that are all important and you use in, in in in combination. And so i'm not familiar with 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 how to do as a thing to be able to like mix one song into another? Well you need to know music because music has different, i'm really going to, but you so djs are literally going to laugh at me in their whatsapp groups, but um, different beats per minute. So every song has a different beat per minute. So you need to learn about the different beats per minute So you can merge them. Um, every song has a different key. I think 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 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 the same time. So you need to learn about the hardware before you can mix two songs together and then, um, yeah, actually, interestingly, in the first hour of lessons, I was expecting to 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 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 to start over there, whereas i was expecting to jump on the decks. Yes, that is a brilliant example of deconstruction. It's exactly what we're talking about. So the skill is not Dejing itself. It's learning about keys, learning about tempo, learning about transitions, learning about all of these smaller things that you need to use in concert in order to use them together to do this more 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 little subcomponents that I need? And then the next layer down from that is once you've deconstructed into the smaller parts, that's when you start to do some research, of which of these parts are more important or less important. What should I focus on first? What can wait until later? And so like tempo and musical keys might be really important and so it might make sense to, to start 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, you know, all of these things that comes later, get this stuff down solid first. Nobody wants to wait. Yeah. You know, you know what I mean. That's the thing, like I think there's an element to which that's true. There's also an element to waiting here, going about it in a little bit more of a deliberate fashion is what gives us an advantage as adult learners. Like we can approach what we're doing in in a strategic way, we can, we can focus our time and attention on the things that are going to have the highest rewards first. And so just a little bit of impulse control of like I'm gonna hold off on the buttons for a couple hours to learn a little bit of this first. Like that's where you start figuring out the inflection points in the skill, 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 of time. And then the trick on the research phase, and this is the one that I struggle with a lot, because I like research, it's fun for me, I can get stuck here. And so the trick is to do just enough research to give yourself context understanding what you're looking for, an idea of what it looks like to do well, or to not do well. And from there, you do just enough to know a little bit of what you're doing. And then you actually start the focused deliberate practice. component because 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, that people call them in culture procrastinators. But I had a conversation with Nel and he said we're discomfort avoiding creatures And he said whenever you find yourself procrastinating, um, it's basically because there's discomfort associated with the task at hand. Yeah. so I had a conversation with someone very close to me recently actually yesterday and um, in our conversation, they've been meaning to do this online project for a long, long time for two years now and they've just done everything but this online project and when we kind of deconstructed it as you said, it was really because they don't feel competent. Yeah, in several of the individual pieces so they're just like researching themselves to death and mak taking no action. Absolutely. This is one of the biggest the biggest barriers to learning as an adult. Um, adult learners hate to feel stupid. We hate to to feel over our head that we don't know what we're doing that we're going to look bad in front of others that there's some idealized skill level that would represent success and your early attempts look nothing like that. Um, there was an interesting study that was done about changes in um, in artistic ability and inclination over the human lifespan and so when when you ask a bunch of young children are you an artist? Every one of them answerers Yes. 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 middle grades Uh junior highish where people will start to say like no, this not something that I do. and there's a certain amount of self-consciousness that develops in the process of becoming an adult where you can start to recognize that the difference between what you can do and what you want to do can be somewhat extreme. Yeah. And that self-consciousness can be an active barrier to to getting started in the first place. Um, so by comp 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 like early stages of skill acquisition, if you're comparing yourself to the masters in hours one, two and three, you are not doing yourself any favors at all. Um, and then even like, I think that's a little bit easier to avoid because I have only golfed a couple times in my life comparing myself to tiger Woods doesn't feel like even like conceptually appropriate thing for me to do that that's that's not difficult. The harder thing is comparing yourself to the other person who has not golfed very much but somehow hit a shot straight or Or whatever Or like it feels like this shouldn't be so hard for me. Why is this so hard for me? And then like the self recrimination feedback loop starts And so um, I talk about in the in the first 20 hours I call this the frustration barrier And so generally speaking Rough rule of thumb hours 1 to 10 are brutal emotionally speaking And so those th that's the period of time where um, you're really frustrated. Things make very little sense you're like, I don't know what a key is let alone a key change What's a beat per minute And like all of those self--consciousness circuits are fully online, fully firing and um, no matter how much you want something, those those first few hours 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 way to get around that also the way to get out of research mode into doing mode. And this is this is where, where the title, the first 20 hours comes from from the first 20 hours refers to a pre-commitment, which is a very useful piece of behavioral psychology that says that if you pre--commit to taking a certain action either a certain amount of times or within a certain period of time either to yourselves or ideally to other people, you're far more likely to actually follow through on the doing of the thing. And so what I found is that in learning a new skill, making a pre--commitment, that no matter what, I'm going to spend 20 hours doing this thing, I might be terrible. This might be really uncomfortable. I might hate it. I might never do this again. But no matter what I care about, this thing that I want to learn enough, that I'm going to invest at least 20 hours of my life figuring out if this is good. if this works for me. If this is beneficial, you said something there, which I think is key, which is sure you said this matters to me enough. Yes, That feels like it's a prerequisite something that we really need to be clear on before we even start. Yeah, You know, because without that part, you, you refer to it in your 10 major principles of rapid skill acquisition as choosing a lovable project. Exactly. Yeah. What does 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 things that might look feel sound fun or interesting to us. And so there there needs to be at least some minimum threshold of, yeah, this is important to me to make some trade--offs in other areas of, of my life or to, um, not watch that that movie or, you know, not relax on on social media this 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 generally speaking, I found that for myself, if I'm not willing to make the pre-commitment to put at least 20 hours into it, that's a pretty good indication that it is not important enough for me 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 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 that as well. Number four is deconstruct the skill and subskills. Number five is obtain critical tools, which I guess is the tools you need to do the practice, right? Yeah, that's, um, kind of a subset of removing barriers to practice. Okay. And so the classic example here is, um, so many people in the world want to learn how to play the guitar. And so the thing to not do is buy a guitar and leave it in the case and put it in. Uh, a closet upstairs far away because that just requires too much time. Energy thought attention of like remembering where it is going upstairs, grabbing the guitar, getting it out of the case, getting all ready. The best thing that you can do is just make it really, really easy. remove all the friction from it, get a little stand, put it right next to, you know, your living room chair or couch where it's visible insight. All you need to do is reach over, 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 all 10 there. The last one is emphasize quantity and speed. Yes. Yes. Mean, so early on in in the process, there's a tendency to like want to do it perfectly sooner versus do it doing it in perfectly more is actually more beneficial. And so in this case, you for, for your djing, mixing a lot of songs, one to the other is going to teach you a lot more than just hyperfocusing on what song A into song B, and I'm going to work until this is perfect. You're just not going to learn as much. It's the variety, the exploration and the variety of circumstances will teach you more about what it looks and feels and sounds like than trying to get too perfect on one specific thing too quickly. So like going back to the the playing guitar thing, like get a bunch of tabs and learn how to play a whole bunch of different songs, not super well, because it's the commonalities that you learn between the different experiences. Those are the things that really tune you into what's really important. The foundations of the, exactly like, yeah, what's a chord? So for what's a chord, how do you change from one chord to another? Um, tracking beats tempo, things like that. Like those are the foundational skills that apply across pieces of music. And so if you practice those first across a wide variety of things that's just optimizing that early practice around things that will stick that you, you'll use a lot. Is there anything about the subjec of learning and the first 20 hours that we've not discussed that you think is especially important to close off on if someone is really that they want to learn a new skill and we're thinking about where they are and where they want to get to? Is there anything else that you think they need to know that we haven't covered? I think that this duv tales a little bit with our conversation around Pon, spend more of your time doing weird cool things like having that, that exploration budget of, of really just like the further a field you go, the more things you discover, you'll find some surprising commonalities that can be very interesting and very cool. Um, we were talking about Apple Earlier, one of the primary design in irations for for the Apple computing system was Steve Jobs taking a random calligraphy class in college. And it's not something that you would put together in some sort of obvious way, but it was an important enough influence of being able to take some part of life and like apply it in a different way in a different context to another thing that, that unlocked a lot of value for a lot of people. And so, for me, like in, in, in the larger sense, I think it's just really valuable to take a step back and think about like, what might I want to experience or what might I want to learn how to do at some point in my life? Just make a list could, and it can be, I think, self--editing here 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 benefit of, of a, an approach, like the first 20 hours, is it gives you a way to make actually going about doing that thing. look, and feel far more approachable than it Otherwise, might be. When you said the thing about Apple there in Steve Jobs, going to that typography, calligraphy class, it made me, it made me realize that in life, there really is no such thing as a waste of time. No, there's really not, because we, you know, we think of, oh, chilling on Netflix as a waste of time. But you can uncover something about story arc from watching a movie that makes you bring that into Every business, regardless of size, has five core parts: value creation, marketing, sales, value delivery, and finance. Value creation focuses on identifying and meeting important unmet needs; solving a problem people will pay for in a large market is key. Marketing leverages five core human drives (acquire, bond, learn, feel, defend) to attract attention to your business offering. Sales involves converting interest into purchases, focusing on benefits rather than features and utilizing storytelling to engage potential customers. Value delivery ensures customer satisfaction and fosters repeat business, maximizing customer lifetime value. Finance involves managing money flow, making informed decisions about spending and resource allocation to ensure sustainability. Understanding these five interconnected parts provides a powerful framework for business success, applicable to both startups and established corporations. The "Personal MBA" book simplifies complex business concepts, making them accessible to those without formal business education. Rapid skill acquisition, exemplified by the "First 20 Hours" concept, emphasizes focused, deliberate practice to achieve significant progress quickly. Experimentation and iterative feedback are crucial for learning and improving in any business endeavor. Starting simple, focusing on core essentials, and gradually adding complexity is a more effective approach than aiming for immediate, overwhelming complexity. Understanding human psychology, particularly customer motivations, is vital for effective marketing and sales strategies. Competition is a natural part of the market; learning from competitors and understanding the market's needs is essential. Careful financial planning, including understanding key metrics like monthly overhead and net profit, is crucial for business sustainability. Pre-commitment to a learning process, such as dedicating 20 hours to a new skill, increases the likelihood of success. Removing barriers to learning, such as procrastination and self-consciousness, is important for effective skill acquisition. Based on Josh Kaufman's work, particularly "The Personal MBA," every business essentially consists of five core interdependent processes: Value Creation: This involves discovering what people need or want, and then creating it. It's about making something people are willing to pay for. Marketing: This is about capturing attention and building demand for what you've created. Letting potential customers know you exist and what you offer. Sales: This process focuses on turning prospective customers into actual paying customers by completing a transaction. Value Delivery: This involves giving your customers what you promised them and ensuring they are satisfied with the transaction. This includes customer service and support. Finance: This is about managing the money involved in the business to ensure it brings in enough revenue to make operations worthwhile and profitable. Based on the provided context, here are three financial metrics mentioned that are often considered crucial in business: Revenue: This is the total amount of income generated by the sale of goods or services related to the primary operations of the business. Gross Margin: This represents the revenue a company retains after incurring the direct costs associated with producing the goods or services it sells. Net Profit: This is the actual profit after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from a company's total revenue. The context mentions these terms when discussing why some people might be intimidated by business finances and also references Richard Branson stating the need to know just three key numbers in business. Based on the provided context, here's Josh Kaufman's advice for aspiring entrepreneurs regarding experimentation and gathering feedback: Focus on the Core: Quickly figure out the essential elements that will determine if your business idea will succeed or fail. Prioritize Idea Validation: Concentrate on validating your business idea early in the process, rather than getting caught up in less critical details initially. Seek Market Feedback: Actively ask potential customers within your target market if they would spend money to solve the problem your product/service addresses. Test Quickly: Get something valuable (a prototype, MVP, or core offering) in front of potential customers as rapidly as possible to gauge their reaction. Minimize Early Investment: Conduct these initial validation steps in a way that minimizes the time and money spent, especially if you have limited funding. Avoid Premature Scaling: Don't invest heavily in building out a full product or service before confirming that there is actual customer demand for it. always wonder that I think, you know, if you're trying to think of a new business idea should you sit down with a piece of paper and sketch out the problems that you've had in your life? Should you just start to become more aware of your day-to--day life and then make notes in your journal Or is there another way to find that idea? Yes, Start there for sure. Yeah, and then go out into the world with your eyes open just looking for problems, annoyances, frictions um, things that are just a little bit annoying or suboptimal in some way. I mean, I I think kind of a general a general question like we're not humanity is not running out of problems to solve the there are millions of opportunities to make someone's life a little bit more pleasant, a little bit more secure a little bit bit more interesting, a little bit more fun. And so 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 world with other people. and just noticing in a way that you've never noticed before of, oh, there's something 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, 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 we make just, just this opportunity a little bit more fun or different or interesting? Um, this is this is where like, um, over the past 20 years and consumer goods packaging design has come 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 shopping, that's a good thing It it moves an enormous amount of product and it's something that you have to plan for from the very beginning stages but it makes a huge difference. It's so interesting, cuz, 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 live with that I've kind of just assumed is the way of the world and it's just 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 podcast a long time, a couple of years now, three, four years now and every single time before we start the podcast 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 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 there was any in this [__] room. Um we would we would make our own mic. We would solve the problem. We could we could 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 say this because we could have probably fixed this. we've been very busy, but we could have probably made a new mic with a new bas that suspends the mic. So the vibrations don't go through but I say this because everybody in their lives has those frustrations, absolutely things they're just living with and they they're kind of assuming that someone else is going to solve it or it's just the way the world is yeah what's sorry Jack we can't hear you Jack jack's defending himself from the corner sure yeah yeah it's difficult with sm7 bs but uh no there's a company called Reot that makes some really amazing universal shock mount adapters for microphone I think we should I think we should do it and we should sell it we'll have a meeting about that later are you gon to go get it yeah totally are you gon to go get it oh it's in there 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 would I guess suspend the microphone and limit the vibrations going through it yeah okay but we tried it and it didn't 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 that as an example and everybody listening to this now has daytoday frustrations, things they observe and go That could be better sure And they go I hope someone else figures that out. Yes. and that's the entrepreneur that's going 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 the one that solves that problem and then what happens it depends on the idea. So for example like manufacturing idea like this is this is where we start getting into the different types of businesses whether you're you're building a product or building a service um, some sort of shared resource membership. Um, I i talk about 12 different forms of value in the personal MBA. So the instantiation of the idea really depends on the form of which the, you're, you're going to deliver it to to the end result. But like, a lot of times the early stages are prototyping, finding people who might benefit from this thing, getting their input advice perspective. And that gives you the information that you need to either continue going down that path. Or sometimes the information is, yeah, this is a, this is something that could potentially be a really good idea, Um, but is, is not going to be a viable business for, for whatever reason. And so some of those early stages of entrepreneurship are very focused on, what is this, how might it work? Can we sketch it out in enough detail to know what questions we need to answer next in order to figure out like, what are the critical assumptions? can we meet those critical assumptions to make a viable business? If so, yes, let's move on to the 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 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 microphone from the vibrations of the table at some point as those vibrations travel up and I can see in this quite cool contraption actually we've used rubber here Yeah, assuming that if we suspend it with rubber there I'm 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 an assumption we've made I'm guessing it failed it failed Yeah, I think the okay yes okay so these are the assumptions you're talking about yes and and there's also um in this specific example it's something that will serve the need with this particular microphone and so for example you might be able to solve the problem in a very straightforward way by changing to a different microphone that has different options available so a lot of it just depends on the constraints that you're dealing with and this is the early stages of figuring out how to give value to the end consumer this is the sort of iterative experimental failure-ridden process yes which everyone has to go through and i think this is important to highlight because what often will happen is people will take the first pop at it. 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 they'll concede. uhhuh Yep. When it's and a lot of it comes down to how big is this problem? How urgent is it? How many people need something like this? Um, so this is where you get into like the, you know, st this the standard supply and demand sort of economic consideration. Is this a need that only you have or is this a need that many, many people have and how, how big of a need is this? Is this something that for example, um, high-profile podcasters will pay thousands of dollars to solve or is this something that affects only a subs segment of people and is not valuable enough to, to bother with or to invest a lot of time and energy researching, finding a a solution for? How do we how 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 creation and marketing tend to intersect and so it's can you identify people out in the world who have a very similar problem set of things that they're think thinking about set of questions that they're trying to answer and the more of those people you can identify and the more urgent and pressing the need is um that's the first thing that you need to to look for in terms of of identifying viable markets so they tell 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 ask them to place a pre--order that that's that's the step two h okay so it's it's not the question isn't do you want it is it's is this enough of a problem for you to pay money to solve it um um there's a a guy desk trainer who who founded intercom um has a saying i just love he's like show me a credit card that has been swiped to solve this problem and i will concede that the problem is real and so you're really looking for like are people is this big enough important enough are people spending money to solve this particular need if so that's a really great sign you're on 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 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 then if we get I don't know a couple of hundred a couple of thousand probably a couple of hundred couple of hundred 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 sense it does and then you do a short run to mitigate your risk first okay you get your your uh initial fe feedback from your first run of customers they will have opinions about what works and what doesn't MHM and then um if that is enough that's when you start like start small and then you work up to to larger and larger batches of production because what's happening a lot out there with aspiring entrepreneurs is they're spending two to three years building their company and it's all leading up to this launch day where everything's riding on this big launch day they've raised, I don't know, $70,000 for their whatever. sure why is that the wrong approach to take? I think there's a difference between doing business and playing 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 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 actual doing of the business is the value creation, marketing, sales, value delivery, finance and so the more you can skip all the early stuff, get to the core of what is going to make the business succeed or fail figure that 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 that bit. But yeah, it really is, like at the idea validation stage, it's, how can you ask enough people who might be in the market to spend money to solve this particular problem? How can you get something valuable in front of them as quickly as possible? What would that look like? And how can you do that particularly early on, if you don't have a lot of funding in a way that minimizes time and finance, because the worst possible, uh, way to go about things is raise millions of dollars of venture capital and build up out this whole thing, only to have no one buy it at the end. You started with this point of value giving value to other people. Why? Why is that the, the frame to think through when you're thinking about the idea? Yeah, I think if you are not providing value to other people in a fundamental way, you have no business, Um, a venture that markets and sells something that does not deliver value to other people is a scam. And so really, like, I think there's, there's a way of thinking about business. This is one of the things I find fascinating about it. Business to me is, is a generative act. You are going out into the world, you're finding a problem, you're finding a solution to that problem. You're creating something that makes the world better in some fundamental way. And then you're bringing it to the attention of people who care and you're convincing them that they need to try this to actually solve their problem and then it works and then they give you money for it. It's great. So you can just keep that process going going for for as long as as it makes sense to everyone involved. Like I I think to me a well running working business system is a thing of beauty. You're solving people's 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 makes your life better in the process. I think that's a wonderful way to live your life. And if you don't start by asking the question, what is the valuable thing that I am going to deliver to people who care the whole thing pulls apart? What step two, then? yeah, marketing, marketing, give me an example of a business and the drives that it's kind of playing to in its marketing strategy. So if we think about Nike, maybe, sure. Yeah. So, um, the the 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 would say the, the, there can be like the acquiring status drive, There can also be very much like ingroup outgroup dynamics are a form of bonding, right? I'm the type of person who identify or who will wear this sort of thing. I form relationships with people who care about these sneakers, These special additions, these athletes, these, whatever, um, less learning, less defending feeling can very much be a part of, of a product experience, like people who strongly identify with certain brands, certain lifestyles, certain ways of, of being in the world, like when you put on something that makes you feel good, there can be an emotional component to that experience. That's very, very strong. It's 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 status project product, and it always has been bond. Again, most much of their advertising is about connecting people in connection, Learn, again, you know, much of their marketing is about the fact that you can learn on these devices, like the ipad, for example, Defend, they talk about how encryption a lot and huge focus on security and privacy right now. for that reason, yeah, the drive to feel, I guess, most of their marketing when I think about the Vision Pro, where they weirdly show like the dad and his kids and he's got this massive headset on, I guess that was an attempt to arouse em the Vision Pro now has this sort of spatial video where you can, you know, one 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 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 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 white silhouette person dancing on a col? Those advertisements were straightforward, feeling 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 more strongly. It's pure emotion. And they specifically, you know, so a more like straightforward drive to acquire on a technology product is, is like how many gigabytes of storage does this thing have? And they talked about, they made a deliberate decision not to talk about that at all, because it didn't matter. People didn't care. It was all about here's how you can feel through the experience of using this product to have an experience you wouldn't otherwise 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 make something that is logically better versus something that is emotionally more compelling. mean, it's possible. it's my next business IDE. I told you yeah Um, but like things like the packaging and the marketing and the scent and the unboxing experience and the anticipation of putting it out as as the centerpiece when all your friends come and all of that like there are so many emotional hooks to that sort of experience that you could argue that candles are sold almost all on emotion and that's great that's the value that's being delivered do you know a better example of that I've came across recently liquid death oh yeah it's just water what yes they built a billion doll business selling water in a fancy can totally and affiliation like there's a little bit of a bonding or I'm the type of person who wants to present to the world in this particular way so I don't buy Fiji I buy liquid 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 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 and they're like a fairly new market entrance in the grand scheme of things and and from what I can observe it's just a different can. Yeah, and the packaging matters, the affiliation matters, the story matters. why do you think they won? I think they were first so that's also, um, you talk about in your book the value of doing something big and crazy for the value of doing something big and crazy? I mean, they were the first to do something crazy on the marketing side for water. It was a really boring product category, very straightforward, very functional, Um, 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 there's a certain subs segment of customers that would not buy a straightforward bottle of water because they don't care. But if they can signal something about themselves or a group affiliation in in some way, shape or form through the packaging of the product, then then to a certain subse of customers. That's valuable. I've been thinking about this theory for a while, last couple of months, maybe six months. now. that brands need to especially new market entrance in saturated busy 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 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 antithesis of the incumbents Yes, So you are a or not an and in your customers's decision framework for and what I mean by that is to be very specific. Um, I've 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 with them, um, when we sat down, I said, you know, this brand I think will win if the consumer walks down that supermarket aisle and thinks to themselves, I can be a insert incumbent energy drink brand MHM or a perfect TED person. I can't possibly be both right? And we all know that, well, I think a liquid death customer doesn't believe they can be a EV and water customer. Sure because that it's so clearly they've stood for something so much so that in doing so they stand against something and and this is what breakout brands have done brew. Dog is a good example in the UK. BRW dog came into the market. indie punk beer. They literally took Carling beers and stuff like that to fields as part of their marketing and blew it up with dynamite to say we are not commoditized beer. We are the 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 liquid death bulls. Yeah. yeah. And there's there's a whole like on the psychological side of things the the studies about signaling and counter signaling. like this is this is how fashion in in the the broad scale works. So all the cool people, high status fashionable people start wearing a thing to signal group affiliation of like we are the type of people who wear this. Yeah. And then very quickly you have follow on, folks who like, oh, the cool people are wearing this, I should start wearing this too. And that happens a couple generations until that thing is at Marks and Spencer Target, uh, choose your retailer. And then the people who want to distinguish themselves for, from all of the things that are being sold, the mass retailers will change fashions specifically to signal that we are not that. And so the cycle begins again. And so that that's just like social signaling is a rabbit hole, that you could spend decades going down and not get to the end And that is such a fascinating part of human psychology that, um, generally speaking, if you can. So you could say like, um, Apple did a lot of counter signaling because Microsoft, you know, some of the incumbent manufacturers was their, uh, their famous, uh, 1984 advertisement was almost pure counter signaling. It was almost pure emotion. And it set them up as the polar opposite to faceless Beig computer box corporation. And so, yeah, like, if, if there's something that is, is the prevailing trend in a certain industry, it can often pay to, you know, in in the anthropological sense, take a step back notice what's going on here's the signal that's being sent and then make a deliberate decision to be the polar opposite of that. It takes guts, though, because there's no blueprint for the opposite. Yeah and you stand out. Yeah which is great. You get attacked. Yeah, I mean that's the the benefit of controversy too. So controversy can be a wonderful marketing tactic if you use it responsibly responsibly and so you know you don't necessarily want to turn your business into a soap opera but by um, by deliberately courting a certain amount of controversy focused on the benefits or the features you can attract a lot of attention that way. And that's what I mean by the brewog example where they took beer to their competitiv beer to a 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 controversy is energy and it's making people make a decision exactly and that results in what is what became a multi-billion dollar indie beer brand with a fraction of the marketing budget. but also that had been around a fraction 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 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. 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 that are struggling right now with marketing, I think much of the reason they are struggling is because they are vanilla wallpaper. Yeah. I mean, this going back to our new product development conversation. that's what a lot of people struggle with too. Because they have their first conversation with somebody who's like oh I hate that it's gna work 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 people you need the tiny fraction who care more than everyone else M and a certain like a certain amount of polarization is a very, very good thing because it means that the thing that you're doing is distinctive enough like the people who care, really care. they really love it. They're going to buy it consistently buy it often. The people who don't care might be completely apathetic 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 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 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 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 noisy online market, but even an IRL market. what would you, um, what kind of skills and principles or first principles should I really be thinking about to become a great marketeer? Because, you know, we can get carried away with the fish. And what I mean by the fish is tactics and strategies. But what 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, fundamentals of human attention that comes down to psychology. So, so the vast majority of people moving through their lives are busy stressed, overwhelmed already have too too much information bombarding them from all uh, all points at all times. And so figuring out I think this is a story you tell in 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 life? um, it's a little bit hyperbole, but it's, it's true, like most of us are just wildly oversubscribed in in terms of attention and time and energy. And so figuring out the little bits of being able to, to highlight the thing that's most important, most interesting most valuable upfront quickly in a way that cuts through that is the primary skill of marketing And a lot of the the other particulars, the tactics, the strategies are very dependent on what market are you operating in what scale are you operating at like all of that stuff but fundamentally understanding that people are busy and starved for time and 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 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 you said five-step framework of what really matters? Sure. Yeah, this is sales. okay, sales. And so for a candle business, this might look like direct sales online. It could also look like intermediate intermediatory sales like through a distributor. And so it's funny, like value creation, marketing, value delivery and finance. All of those are the processes where, uh, where money is flowing out of the business. you're spending money to do all of this analysis. Uh, sales is the part where money comes in, which makes it makes it particularly important. And so some of the early decisions around sales are, um, how are you going to ask for the sale? What does the sales process look like? And are you dealing directly with the customer that who is purchasing from you? Or are you dealing with some sort sort of independent third party or sometimes multiple third parties in the process Like a retail or distributor? Exactly. Okay. And in order to be exceptional at selling my candles, is there anything that I should bear in mind Maybe when I'm making the candles, how I'm packaging the candles, the way that I'm, you know, going to those retailers or? Yeah, so I think, um, there's a part of because sales is kind of in the middle the process. There's a part of sales that intersects with marketing in the sense of you're trying to make this maximally appealing to get someone to give you money for it. And so the customer understanding how, how can, how can we be persuasive in getting someone 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 neglected, which intersects with the value delivery part of the process, which is the point a sale is not just to get a customer in an ideal way. it's to get a happy satisfied customer, someone who not only purchased the thing that you bought, but is happy with the thing that they bought and is thrilled that they did business with you and is planning on doing business with you. Again, why is that so important? Well, it's relatively straightforward to make a sale once, um, usually the first sale is the most expensive and so generally a repeat c repeat customers are the best customers you will ever have. They are already know you exist, they already know your stuff is great. Um, you don't have to attract their attention again, necessarily. Um, and depending on what you're selling, like those repeat customers, can the lifetime value of a repeat customer can be extraordinary. And so if you've already done the work to get a customer once, then you should want to keep them happy and keep them around for as long as humanly possible. what's lifetime value? Oh, lifetime value. This is, this is a fun one. Um, so lifetime value is the sum total of all sales of a customer with a business. And so, imagine, um, Jack I sell Jack a candle. Yes. now Jack, how many candles do you uh, do you burn a year? Seven seven. Okay. so take the the profit that you make per candle. So I'm selling the candles at $10 and I make $1 profit on them. Yep, times s 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 Jill who burns the candle every week. why? Why is it more powerful and compelling to the customer to focus on the benefit versus the feature? Is there something in our neurology Is that a word neurology? It is a word, Is that the right context in our brain? Yeah, well, I think this, this gets into, um, some bier psychology things, which is people generally, before making a purchase decision, imagine what their life is going to look like. if they go down this particular route, If I buy this thing, if I, uh, sign up for this service, if I become a member at this club or gym or, or, or whatever, um, there's, there's a, a mental simulation process that very often happens of like May, maybe buying a 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 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 the neighbors? gonna are they gonna look at me? gonna think I'm cool, You know, like there's, there's this, like with a little bit of information, our brains can kind of extrapolate or start to predict what is likely to happen out into the future to a certain extent. And this is, you know, to, to, to some of the things you talk about in your book about storytelling. This is why stories work for marketing and sales. It helps people engage that part of their brain that can, that can simulate a potential future that looks and feels really great and start to anticipate it, get excited about there like a sales equation of 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 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 many, many frameworks, I think the, um, the biggest, most most popular one, uh, which a lot of people get stuck on as the whole features versus benefits conversation. And so, um, in the context of candles fe a features conversation would be is this candle is made from 100% soy wax. People don't necessarily care. It's not relevant to the reason that people purchase candles. Benefits are the things that people that get to those core human drives the things that that motivate the purchase to begin with. And so one very useful way of thinking about this is whenever you're doing any sort of marketing or sales, you're focusing on the benefits, the things that you're delivering to people, the things that are enticing. and if you talk about features at all, you use them as reasons to 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 uh, taking an an ecologically friendly approach to your your candle business, Um, the fact that 100% soy is very clean burning and environmentally friendly might be a reason to believe that this benefit is I think about, um, when i was thinking about this candle business that i'm hypothetically going to launch one of the things that 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 when i hear entrepreneurs or i hear sof preneurs which is someone who's got an idea on the sofa one of the reasons 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 someone solving that problem uhhuh and then they go no there's no there's no money to be made there what role does competition play in this whole pitch is competition a bad thing a good thing a signal that i shouldn't yeah there's something really fun here um i talk about it in the book i call the iron law of the market, which is, um, a way of saying that markets that don't exist, don't care how smart you are. It was a Mark Andreon quote from way back in his Netscape days. And it's the whole idea. Like it's actually a really good thing that there are a bunch of people selling candles in the market because that means that there's a large market of people who are willing and able to buy candles. It validates the, the, the need. it validates the existence of the market in the first place. The markets you need to be really careful about are the brand new to the nobody has ever seen anything like this on the face of the earth? Because not only do you need to educate and convince people you have no idea whether people have will purchase this thing that you've made This is a story, a story that I tell in the book, um, Dean, Cayman, like prolific inventor. This was the development of the segue, the like, oh yeah, balancing scooter thing. Yeah, I remember. I think this was a 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 that is going to change the way that cities are planned? The hype for it was absolutely extreme. And when it came out, it turned out that people didn't want to buy a $110,000 alternative to walking or riding a bike. And so it's like those, like nobody's ever done this before can actually be in in a weird way. A bad sign. Um, you want something that like the market exists. The need. Is there people are excited about it? People are looking for solutions and then like liquid death If you can come in and do it in a fundamentally different way that grabs a lot of Um, because you can learn so much about how people do things. Um, look at their labeling, deconstruct their packaging, look at their price points. Where are they selling? How are they doing their online advertising? Um, and the wonderful 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 and and learn from what people are doing and then combine that with your own research going out and talking to customers on your own, having your own experiences, your own ideas. And that's where you get your unique take your taste, your twist on on that particular way of of doing things. What else do I need to be thinking about? So I've done my market research on the candle business We've got the marketing done. I'm I understand the the sort of sales framework that I should be thinking through I've bought every candle in the market now Mh Is there anything else that is really important to be thinking about as I go forward and launch this company? Oh yeah, we haven't talked about dollars and cents at all yet Dollars and cents. Yeah, Finance Okay, so you know as you're doing all of so development takes money making product uh, requires money. Um, customer service requires money. Manufactur like all of the you're spending a bunch of money making this product you have At this point since this is a startup you have a price that you think is supportable. Hopefully you're collecting pre-orders you're getting some market information about like how much you potentially be able to make here. Financial analysis is the part where you're taking a look at all of these decisions and tradeoffs that that you've been making. Where am I spending? How much if I have to make a choice between A or b? Which one am I am I going to make? And then the finan finance is basically just a systematic way of making decisions around monetary considerations. Um in the case of a manufacturing business you might have raised some some early capital friends, family loans investors, credit cards, whatever. How much do you have at your disposal? How much runway do you have if you've hired people? How many months do you have left before you really need to be bringing in more than than your outflows or else you're going to be in trouble Very quickly. Yeah, I think experimentation removes the pressure [music] to know or feel like, you know what you should be. doing every moment of every day um i think there's there's a sense of like we kind of conflate certainty or over certainty with competence in a way that's not necessarily functional whereas we're all very imperfect oracles like we have anticipations based on our knowledge our experiences um the information that we're collecting about the world around us and we're all using that all the time to try to predict what's going to happen next just how our brains work it's what our brains are for and i think there's a sense of we can do that to a certain extent to eliminate some of the more obvious errors that we might make but when it the when it comes down to making a decision about something we've never done before the honest answer to will this work is i don't know let's find out and so there's a certain amount of if that's the case if we can't be 100% certain what's going to happen if we try plan a or plan b or plan c Then there are a couple of ways of approaching that one is is um by working through scenarios of like let's just imagine what would it look like if we chose plan a let's play that out a little bit let's try to make anticipations about what what might work or what might not Um, and let's compare our different alternatives and and see what what looks the best feels the best Based on our anticipations right now that's valuable, but it can only go so far because it relies on all the the knowledge and exp experience that we've collected to date. It doesn't account for the knowledge and experience that we're going to gain through the process of making a choice and learning from the choice. And so one of my very favorite mental models, this comes from computer science and, and decisionmaking is called the explore exploit trade-off. And this might be entertaining. It comes from decision research. uh, actually about gambling of, of all things like, imagine, um, imagine you walk into a casino and there are a 100 slot machines that you get to play for free. Each of the machines has a different payoff, but you don't know which one your job is to find the very best one. How do you go about figuring that out? You try them all? Yeah, you try them. So you start collecting information, right? Like the thing to do you when you walk into the room, you have no information. And so the first phase of solving this problem is to explore, You just try a whole bunch of things, and you collect information. Every time you pull this slot machine, does it pay out or not? The longer you do this, the more information you collect. And after a certain period of time, you start to get a feel for patterns of some things seem to be more obviously good and other things seem to be more obviously bad. And so over time, you shift into the second phase, which is called the exploitation phase. So you take the knowledge and experience that you have, and you use it to do the best performing thing that you're aware of at the time more often. So you're playing the higher winning slots more. The key is, though, the exploration phase never stops, it just gets smaller over time.