benefit-of-competition/

The Mercenary Rule

Make money your god and it will plague you like the devil.
—HENRY FIELDING, EIGHTEENTH-CENTURY NOVELIST AND SATIRIST

Becoming a Mercenary doesn’t pay: don’t start a business for the money
alone. Here’s why: starting and running a business always takes more effort
than you first expect.
Even if you identify a business that will largely run itself, setting up the
Systems (discussed later) necessary to run the business requires persistence
and dedication. If the only thing that interests you about an opportunity is the
money, you’ll probably quit well before you find the pot of gold at the
bottom of the landfill.
Pay very close attention to the things you find yourself coming back to
over and over again. Building or finishing anything is mostly a matter of
starting over and over again; don’t ignore what pulls you. The trick is to find
an attractive market that interests you enough to keep you improving your
offering every single day. Finding that market is mostly a matter of patience
and active exploration.
That said, don’t ignore “boring” businesses until you investigate them; if
you can find some aspect of the work that interests you and keeps you
engaged, mundane markets can be quite attractive. “Dirty” businesses like
plumbing and garbage collection certainly aren’t sexy, but they can be quite
lucrative because there’s a significant ongoing need combined with relatively
few people willing to step up and meet the demand.
If you find a way to make a necessary but dull market interesting enough
to pursue, you may have discovered a hidden vein of gold waiting to be
mined.
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 The Crusader Rule

The zealous display the strength of their belief, while the judicious show
the grounds of it.
—WILLIAM SHENSTONE, EIGHTEENTH-CENTURY POET AND LANDSCAPE DESIGNER

Being a Crusader doesn’t pay either. Every once in a while, you’ll find an
idea so fascinating it becomes hard to think about it objectively. The stars
align, heavenly trumpets blare, and suddenly you have the unmistakable
impression that you’ve found your calling.
In all the excitement, it’s easy to forget that there’s often a huge difference
between an interesting idea and a solid business. In your optimism, forget ye
not prudence: changing the world is difficult if you can’t pay the bills.
Some ideas don’t have enough of a market behind them to support a
business, and that’s perfectly okay. That doesn’t mean you should ignore
them: side projects can help you expand your knowledge, improve your
skills, and experiment with new methods and techniques. I’m a huge
advocate of pursuing side projects as long as you don’t count on them to
reliably produce income. Once you have your financial bases covered,
crusade all you want.
Before attempting to launch a business, take the time to do a thorough
evaluation using the Ten Ways to Evaluate a Market. If you’re finding it
difficult to be objective, find a trusted colleague or adviser to help you, then
test it as quickly and as inexpensively as you can before you fully commit. A
few hours spent in evaluation can prevent months (or years) of frustration and
misplaced effort.
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 Twelve Standard Forms of Value

Value is not intrinsic; it is not in things. It is within us; it is the way in

which man reacts to the conditions of his environment.
—LUDWIG VON MISES, AUSTRIAN ECONOMIST

In order to successfully provide value to another person, it must take on a

form they’re willing to pay for. Fortunately, there’s no need to reinvent the
wheel—Economic Value usually takes on one of twelve standard forms:

1. Product. Create a single tangible item or entity, then sell and deliver it
for more than what it cost to make.
2. Service. Provide help or assistance, then charge a fee for the benefits
rendered.
3. Shared Resource. Create a durable asset that can be used by many
people, then charge for access.
4. Subscription. Offer a benefit on an ongoing basis, and charge a
recurring fee.
5. Resale. Acquire an asset from a wholesaler, then sell that asset to a
retail buyer at a higher price.
6. Lease. Acquire an asset, then allow another person to use that asset
for a predefined amount of time in exchange for a fee.
7. Agency. Market and sell an asset or service you don’t own on behalf
of a third party, then collect a percentage of the transaction price as a
fee.
8. Audience Aggregation. Get the attention of a group of people with
certain characteristics, then sell access in the form of advertising to
another business looking to reach that audience.
9. Loan. Lend a certain amount of money, then collect payments over a
predefined period of time equal to the original loan plus a predefined
interest rate.
 10. Option. Offer the ability to take a predefined action for a fixed
period of time in exchange for a fee.
11. Insurance. Take on the risk of some specific bad thing happening to
the policy holder in exchange for a predefined series of payments, then
pay out claims only when the bad thing actually happens.
12. Capital. Purchase an ownership stake in a business, then collect a
corresponding portion of the profit as a one-time payout or ongoing
dividend.

Let’s investigate these Twelve Standard Forms of Value in more detail.

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