26 May

Dragons of Idea Age

Dragaons of Idea Age

In the last five posts, I argued that we have just entered the idea age, another renaissance, and what can we do to prepare for it. This post is about the unique risks that idea age is bringing to your business/career.

Exponential Growth

Exponential growth is a double edged cutting sword. If you not on an exponential growth, or if you are on a slower exponential curve, someone else will set up so much of lead over you in a short time that you might as well go home and hand your boots!

Different-exponential-curves

The graph above shows two exponential curves, one growing at just twice the rate of another. But the difference is startling even after a short growth run. WhatsApp, which is a company designed for the exponential era, has half the market capitalization as Tata Enterprise. WhatsApp employs just 55 people and is 5 years old. Whereas, Tata enterprise employs a small country and it is more than a 100 years old.

Because a competitor growing at faster exponential rate can set a very large lead over others, the slower growing company will soon be marginalized and fail to be of any significance to anyone.

Agility over Accuracy

Early-exponential-start

Because exponential curves grow quite quickly, a delayed start is worse than slow start! In the exponential era, agility in terms of quick start and quick execution is more important than getting things right. Time and again, companies and countries have proven that being faster (Thailand) is better than being right (India). Among the exponential companies, everyone is expected to be reasonably accuracy. But that is just the entry ticket. The real differentiation is the speed at which they execute their business.

Software is Eating the World

marc-andreesen-software-is-eating-the-world

Marc Andreeson (of Netscape fame) famously told that ‘software is eating the world’. Everything is getting digitized. Healthcare is the next industry that is dangerously close to getting disrupted by digitization.

Giants like IBM, Google, Qualcom, Apple, etc. are working on solutions that will record better health data, analyze it better, do better diagnosis, do cheaper diagnosis, etc. They are all in the verge of producing a working commercial solution over the next few years. When they are rolled out, the current healthcare model will be stood on its head.

Other disruptions that are already under way are Uber and Airbnb. Uber is disrupting taxi services all over the world. They own no taxi cabs (only thing they own is an app), but there are talks in the rumor mill that Uber is going to be the next $ 100b company. By the way, when self-driven cars become common place over the next few years, services like Uber will kill automobile manufacturers too.

Airbnb is disrupting hotel services all over the world and it is already valued around $10b. Airbnb too doesn’t own a single hotel room. Only thing they own is an app!

If software companies can disrupt taxi services ‘and’ automobile manufacturers, what do you think they will do to your business! It is a question that is worth pondering over hard and fast.

Network Externality

Network-externality

Imagine you invented fax machine. Just after you made the first fax machine, when there is only one fax machine in the whole world, the utility of the machine would have been zero. After all, who would you have sent a fax to!

But then, when you made the second fax machine and put it in someone else’s office, your own machine will become valuable. Thus, with the addition of every fax machine in the world, the value of your own machine goes up. Not only that, when a new fax machine is added to the network, the utility of everyone’s fax machine goes up too!

The value of fax machines around the world keep going up when more people start using it. Eventually, the utility of fax machine becomes so high that no one can afford not to have a fax machine. In other words, the network effect becomes so strong that it traps you inside it. The cost of breaking away from the network is too high that the network becomes self-perpetuating.

That is network effect or network-externality.

Software companies are much more dangerous when it comes to exploiting network externalities. Because the cost of servicing an incremental user is next to nothing, software companies can quickly grow the network of their users. That’s why in software, the leaders like Windows and Oracle have always had upward of 90% market share!

What we must take note is that all software-enabled services, like FaceBook, Google Maps, Airbnb, Uber, etc. are also enjoying the advantage brought to them by network externality.

So, if and when your business is going to be digitized, you can be sure that it will be yanked so fast and so definitely that you will have no option but to walk away. What is really bad about it is that the software company that is going to eat your meal doesn’t even have to have an office in your country!

What now?

Ask yourself these questions:

  • If Google (or Airbnb or Uber) wanted to get into your business today, how will they do it?
  • Can I do what they would have done?
  • Do I have the capability in me to manage an exponentially growing business?
  • If my answer to one or both the questions above, what can I do to acquire the missing capability? Or, what would be my Plan-B when someone starts digitizing my business?
Click Idea Age for all posts related to this project
21 Aug

Fuck-you Money

Fuck You Money

Buckminster Fuller (of buckyballs) said “controlled time is our true wealth”.  To him, wealth is the time span for which we can maintain our desired lifestyle without having to spend time making money. During the dot-com bubble, Silicon Valley came up with Fuck-you Money.  For them, it is the amount of money you need in your hand before you can stop working for your living.

Sadly, the amount of wealth many of us have accumulated can’t even last a month if we stopped working. For some smart people among us, it can last a few years. It’s only the case of a small fraction of people that the wealth can last their entire life time.

Million Paupers to Billion Kings

Historically, masses never had opportunity to acquire decent amount of money without taking huge risks.  Comparing with today’s terms, human productivity was abysmally low [chart below shows the population and per capita GDP of UK (By the way, did you notice how there is a tight correlation between the population and per capita income?  If you want to understand this phenomena, you should watch this TED video)].

UK GDP across centuries

 

Our culture carries the burden of thousands of years of legacy.  We still live by religious and moral teachings that were conceived 2,000 years ago, if not earlier.  They come from an era where anyone who didn’t take work seriously perished, or became a criminal.  Even the nature of work was such that it placed huge premium on toil, rather than creativity.  You can see from the graph that this was beginning to change somewhere around 1850 and the change picked up pace around 1920.

Take a look at the next graph.  It shows the price of lighting (in today British Pounds, for million lumen hours) in UK over the last two centuries.

Price Of Lighting

When you put the two graphs together, you can see that before 1850, not only people were making far less money, they were spending through all their orifices.  Unlike most of us like to believe, today we live in a world that is cheaper than the past.  And, today, we live in a world where everyone makes enough money to live like how a Duke used to live, if not a King.

We now have an opportunity to make enough money, without taking unreasonable risk, in a few short years to fund our living for the rest of our lives.  Unfortunately, no one tells us that because we are stuck in a culture that is founded on values and customs that were appropriate thousands of years ago.

Note: The above two graphs were taken from this paper.

Education for Foot Soldiers

The education system that we have today was founded in Prussia, during the late 19th century.  The purpose of the Prussian education system was to produce more people who were capable of reading bible and working in the army.  Eventually, when industrial revolution came along, the same education system was used for mass producing workers for the factories.

Back then, it was a huge deal.  10 years of education guaranteed a lifetime of earning opportunity.  And as an added bonus, there was even an assurance of some support cash when a person can’t work anymore.  Life has never been this good and every responsible parent rushed to ensure that their children had this thing called formal, mass produced, education.

Unfortunately, mass education prepares us to be a worker throughout our life.  It doesn’t teaches us the skill required for retiring early in life.  Even after getting a 20 year education, we

  • Can’t even set up a personal financial accounting system (unless we are specifically trained as a financial accounting professional)
  • We have no concept of creating wealth.  We are only geared towards earning money.
  • We learn nothing about risk taking or risk management
  • Training on ethics and morals are relegated to the margins of elementary classes, when we can’t appreciate much of nuances involved.  To make the matter worse, the ideas taught in the name of ethics are often toxic.
  • No one tells us that happiness is the ultimate purpose of life.  Whereas, mass education constantly keeps reminding us that we must be good workers, good citizens, etc.

The list goes on.  But the point is this: Not only does our education fails to equip us with skills needed for creating enough wealth, education and the society actually orients us towards life time of toil. No wonder most of us have no concept of ‘wanting’ to become wealthy for life!

Work subsumes everything else

During our working years, so much of our lives revolve around work. We simply have no time left for anything else substantial.  We allow the work to spill everywhere and ‘life’ to be relegated to the cracks and crevices.  Whatever non-work time that we permit ourselves is mostly used up for recovering from work.  Worse still, very often we spend our leisure time to augment our success at our work.

In a life that is filled with thoughts of work from the time we enter the kindergarten, to the time we are 60 (when physical fitness deteriorates), it is no surprise that we don’t even stop to contemplate the possibility of making a pile and getting out of the game.  We don’t know how to make the pile, or how much, or what to do when we make it.

We are so inseparable from our work that with the exception of perhaps the Batman, all of us define our identies by the work we do!  For anyone in their right mind, it should sound ridiculous.

Non-work is an Unfamiliar Territory

Most of us don’t know what to do with our time if we stop working today.

Many exciting moments of our life happen in our work place.  Until recently, before the online social networks popped up, work is the only place where we could meet people of comparable caliber and taste.  Work also brings us to a larger number of more colorful people.  Work brings us self-esteem.  Work gives us easy targets.  Work removes many ambiguities from our lives.  Work also gives us a clear sense of getting ahead.

Not working has one crucial disadvantage: Too many options and zero training to handle such abundance of opportunities!

Since all of us live such a work-centric life, there is a sheer paucity of sufficiently exciting, and sufficiently engaging, non-work activities in our culture.  The impoverishment of options further reduces the choice of things one could do after one stops working.

We have over-designed our systems to give us economic security. We failed to design them for happiness.  That was OK till the last century, when becoming rich was synonymous to raising above the poverty line, which is the pre-requisite to happiness.  However, with large portion of the world leaving the poverty behind, the idea that wealth is only a pre-requisite to happiness is just sinking in.  We are just beginning to realize that once a certain amount of wealth is accumulated, and our future is secured, we are better off spending our time on pursing happiness more directly.

So, how much is too much?

If you are setting out to make your own pile of fuck-you money, the first thing you need to do is this: Have a number!

Unless you know what will set you free, you will either under shoot and end up working throughout your life, busy making the ends meet. Or overshoot and end up working throughout your life acquiring meaninglessly huge abundance.

Here are some clues that will help you put a number on your personal requirement:

  • The amount of money should enable you (and your dependents) to maintain the desired standard of living for the rest of your life.
  • The amount of money should be sufficient to give your kids the acceptable (to you) quality of start in their life.
  • The amount of money should be sufficient to cover your health care demands for the rest for your life.  And remember, unlike your parents, you are very likely end up living up to a hundred.
  • Around 2020, if not earlier, you will be able to pay money and acquire biological enhancements.  You better have some money for this one!
  • Last, but not the least, you should have sufficient money to chase your passions

If you are looking for living a comfortable middle class life for the rest of your life

  • You live in the West, or BRICS or one of the other fast growing countries
  • You are living in a large city
  • You are in your forties or fifties

if you have acquired approximately US$ 2 million to US$ 5 million (including the money you have to spend in your primary residence), that is your fuck-you money.  If you are looking for living as the upper middle class, then you are looking at 5 to 10 times the number above.

Unless you are planning to use money as a tool to buy you power, influence or recognition, you will seldom need a larger sum to set you free.  Also, if you decide to live a simple life in a small town or a village, you will need much smaller amount.

What is your passion?

Most of the people don’t know what they are passionate about.  Don’t worry about it.  Your passion is likely to change over time anyway.  There is nothing wrong about it.  People whose passion multiple passions live a richer life with much varied experiences.  Even people who stick to same domain throughout their life usually keep shifting their interest areas inside their chosen domain.

There is only one way to find out the things you are passionate about: Try various things!  The more different they are from each other, the better.  The most probable reason you haven’t found your passion is probably because you haven’t been experimenting enough.

Finding your passion outside your work can be a strong incentive to quit working. Or, at least, allocate a decent amount of time for your life besides work.

How to make that kind of money?

Most people don’t know how to accumulate so much of money in a reasonably short period of time.  After all, none of us get an education about making money!  But if you are serious about taking charge of your life soon, you must find an answer to this question sooner than later.

Making money is just a matter of skill. Usually, it is a cluster of skills. The skills are not very difficult and they are very learnable. The problem is you will need to perform all of them consistently with reasonable level of success.

If you don’t set out to find the answer to the last question, you will be dragging yourself through the life, living from day to day, spending 10 to 12 hours on making money, and do it for several decades. There is so much you are going to miss out in life!  That will be sad!!

29 Jul

Naming a Brand

Naming a Brand

If you are, like me, don’t have an inheritance or a nest egg to see you through the rest of your life on this planet with your present level of creature comforts, it is a good idea to start a business, that is, if you haven’t started on already.  If you run a business or planning to start one, ‘how to name it’ becomes a frequently asked question.

Many seasoned business persons don’t sweat over this issue (what kind of a name is Videocon; and who will sell washing machines and smartphones under that brand).  May be they are right, may be it all depends on the execution.  But then, you will name a brand only once; but if you get a great name, you will reap the benefits through out the life of the brand [I wish my parents knew this :-( ].  Hence, not taking the effort to come up with a proper name is sheer laziness.

Here is a set of filters you can use while finding a nice name for your brand.  All of them are simple.  All you have to do is sit in a quiet place and scribble down a bunch of names.  Don’t be scared if you have to come up hundreds of options.  Then you start rejecting the ones that don’t pass through these filters.  I am sure you will come up with a name that you and your children will be proud of.  No creativity required!

1. UNIQUE SOUNDING

The brand name is the handle by which everyone comes to remember the brand. Some names are so generic, holding on to them is like grabbing an eel. A generic name easily slips from the mind. An unique name, on the other hand, is like an ergonomically designed handle. These are some of the unique sounding names that immediately come to my mind: 3M, RedBull, Minkle, Wipro and Tata.

2. ROLLS ON YOUR TONGUE EASILY

If you have an unique name that is difficult to yell out loud, it is not going to stay in people’s mind. For example, who remembers Minnesota Minerals and Mining (3M‘s real name)? Vedanta is to regal, though it’s tougher on the tongue than Sterlite (which is more popular). GMR is more easy on the tongue than GVK. Coke is better than Coca cola. Accenture rolls on the tongue too (even though it is a bit too long, in the Business Consultancy business, it is one of the shortest names). Better still, can you come up with a name that people love to pronounce? Something that people use often just because they love the way it sounds, like Jack Nicholson?

3. NOT TOO LENGTHY

If the name is longish, you are going to have a tough time while designing a logo. Moreover, with a long name, people are going to make up an acronym instead of using the proper name of your business/brand. And there is a very good chance that the acronym will sound horrible. Companies like 3M, Coke, Mac, Cat, GE, GM, IBM, etc. all had long names.  They are extremely lucky that their abbreviated names are unique and roll on the tongue. Not everyone gets that lucky.

4. USES PROPER SPELLING

Don’t pick name like Klassic or Classik. It’s too much of hassle to remember the spelling variation. All your customers searching for you in Google will land up at Classic Furniture, not Classik Furniture. By the way, Classik also fails the first filter (i.e. unique sounding). A name like Classik is worse than a name like, for example, Saravana Furniture!

5. COMMUNICATES WHAT YOU DO

If you have limitless advertisement budget, you can take a meaningless name like Accenture and spend cart loads of money to tell what you are doing. But if you are a small company or a start-up, the name of your business must describe what you do. Don’t name your business after God, founder, dog or other such irrelevant thing. It’s such a wasted opportunity. From this point of view, Coca Cola, General Motors, General Electrics, International Business Machine, FaceBook, Microsoft and Google are good choices. Pepsi, Saravanabhava, Sangeetha, Starbucks, Accenture and Minkle are bad.

6. COMMUNICATES WHAT YOUR USP IS

Your USP (Unique Selling Proposition) is the reason why your customers are doing business with you. If only you can find a name that communicates your USP, you can compromise on few other requirements. Accenture is a name that subliminally communicates superior capabilities. Lexus communicates luxury. And what do you think is the winning entry: RedBull, of course! If you are looking for names that don’t communicate the USP, they are there everywhere: IBM, Microsoft, FaceBook, Saravana Stores, GRT…

7. DOT-COM DOMAIN NAME IS AVAILABLE

If you can get the .COM domain of your name, without prefixes or suffixes, that is an wonderful advantage in itself.

8. SATISFIES NUMEROLOGICAL REQUIREMENT

I am not into numerology and I can’t tell you much about this filter. But if you believe in numerology, this won’t be a laughing matter for you.

By the way, there is also a 9th filter: Common Sense. Don’t forget it.