Trizle

(Aside from yo-self! Hi-five!)

• It's the 18-year-old kid disrupting your industry, but she doesn't know it yet.
• It's the venture-backed team with millions gunning after your company's customers, but you don't know it yet.
• It's the 2012 edition of your primary competitor looking to take over your territory, which will surprise and shock you.

Lady Gaga's biggest competition to attract the masses isn't Taylor Swift, but some unknown teenager training since she was 3 and about to blow up the charts.

Hidden Forces

Fighting known competition at this moment seems simple; yet, the constantly changing world gives us opponents hiding in the shadows looking to devour everything we're trying to achieve.

Fight the craziest, fiercest, competitors you can imagine -- since, likely, they're out there.

...but you just don't know it yet.

The Steps

1. Imagine a big competitor that will destroy your future plans.
2. Plan.
3. Repeat forever.

Neurotically disrupt yo-self.

Warren Buffett: it's better to make mistakes quickly than stand idle and suffer from unforseen opportunities.

Take Bubba:

• Year 1: Bubba has one greeeeeat product.
• Year 2: Dang! Competitors are undercutting my prices.
• Year 3: Dang! I can barely make payroll.
• Year 4: DANG! WE DIE!

Idleness destroys your grand ideas, as your competitors start defeating your offerings by exploiting the latest advances in technology/information/etc.

How Your Economy Disrupts Your Ideas

You live in an economy that grows. And grows. And grows.

• 2010 poor live richer than 2000 rich.
• 2020 poor will live richer than 2010 rich.

O DANG U GOT HI SPEED INTERNET AT HOME, 5GB FREE EMAIL SPACE, AND A $&""%*^+ BROWSER ON YOUR CELLULAR PHONE THAT CAN SHOOT PICTURES AND SHOW SEVERAL MILLION VIDEO CLIPS?? NO WAY OMG OMG NO WAI OMG OMGZ

AND YOU'RE ON WELFARE TOO? AHHHHHHHHHHHHHHHH. OMG OMG OMG XOXO

Persistent Economic Growth?

For instance, let's say that economists predict the economy will grow at a 3% rate.

That means, for example, peeps will know how to produce:

• bananas 3% quicker
• work 3% faster
• apps 3% quicker
• innovation 3% more

Standing idle, while you're stuck on your 2008 idea doesn't let you exploit the best advances that the present economy gives you.

Who benefits instead?

Your constantly adapting competitors, who become more equipped, more advanced, and stronger than anything you've developed/learned/exploited in years past, demolish your 2008 butt by giving your departed customers 2X more product for 2X less price.

Economic growth happens constantly because technology/innovation/knowledge/information keep improving, as people learn to provide more value to others.

To stay in the game?

Keep improving.

(Trizzy's prediction based on Google's latest earnings call.)

You're driving around some neighborhood looking for some Pizza, with your GPS.

BAM!

Based on your location, Google gives you some recommendations on local pizza restaurants (based on reviews like Yelp's), along with additional advertisers listed (similar to how you search for "pizza" on Google now, with pay-per-click pizza ads on the side).

The Future Google

Google purchased the biggest mobile advertiser (AdMob) for over $700M, flirted with purchasing a review site for local businesses (Yelp) for over $500M, are investing heavily into their Android operating system plus Nexus One phone, and are testing a fiber network that enables free Internet to communities -- so the future for your small business that depends on locality seems much brighter with more opportunities for you to get in front of more potential customers.

Free Phones?

You probably won't see much of an impact until the adoption of smart phones equipped with GPS becomes widespread, but Google likely wants to disrupt the mobile industry by making their phones free (or freakish cheap that virtually everyone can afford) to get their phones to the masses and be the primary mobile platform.

Small-business/consumer win.

• "We have to focus on REVENUE!"
• "Our next month's profits DEFINE how well we're doing!"
• "Hey! YOU GET NO REFUND. Should have read the FINE PRINT."
• "WE JUST GOT AWAY WITH CHARGING 1000000% MARKUP ON A CUSTOMER!"

BOO

Focusing on short-term profits that improve nothing about your company in 1/3/5/10 years from now prevents you from building a more sustainable future for your business.

Result? The potential value of your business (it's where the bigger bucks lie, and how Fortune measures the wealth of Bill Gates, Steve Jobs, Sergey Brin, etc, etc) starts to wither.

Yes, short-term profits = good, but surrendering your chance to build for the future because you're only focusing on those short-term profits decreases the value of your company.

Your goal is not to just build a business that can make money next quarter, but to build a money-making machine that can keep making money the following quarter,  the following quarter, the following quarter, the following quarter, the following quarter, the following quarter, the following quarter, the following quarter, the following quarter, etc, etc, etc.

Long-Term > Short-Term

Every little incremental thing that you do to improve your business for the long-term? You increase your business's value.

• Documenting how your business works that you can still use X years from now? Your business's value increases.

Building a fully-validated, search-engine-optimized, company website? Your business's value increases.

• Finding and documenting better ways to source your products? Your business's value increases.

Eliminating your long-term debt? Your business's value increases.

• Fixing customer complaints about X to ensure no more complaints about X? Your business's value increases.

Bagging a big client that you can showcase on your company's website? Your business's value increases.

• Automating by documenting how you get clients? Your business's value increases.

Getting a profile review about your business from a big-time blogger in your industry that will be on the web forever? Your business's value increases.

Every tiny itty-bitty thing that you do to strengthen your business for the long-term becomes another selling point for the business (reflected in an acquisition, an IPO, sale of common shares, etc, etc, etc).

WUT WUT WUT

1. Your business's value increases every time you improve it for the future.
2. Plan actions accordingly.

WIN 4EVA

Bite-sized, continuous, sustainable improvements.

• "We have to give them a pep talk!"
• "Let's scold them to not do X!"
• "We need to put up motivational posters to get better performance! Yay! High-five!"

How does the most prosperous institution in the world (the United States of America) change behavior for the greater good?

It starts with this:

• Change the incentives.

For instance:

• To get people investing? Lower the Fed rates.
• To stop financial corruption? 20 years in prison.
• To increase innovation? Freakish rewards in prize $.

You can talk/scold/motivate people to do X; but, if incentives aren't aligned such that doing X personally benefits them, they'll probably avoid X.

(Even if the behavior changes in the short-term, the non-institutionalized motivation dwindles over time, and folks revert back to their normal ways).

The Big Sales Example

Say you wants to bag big clients. What do you do?

• Start with a big prize ($ or no $) for appointments/sales with Fortune 500 companies.

Now, what if the big prize doesn't seem to motivate your team?

• Make the prize even bigger.  Still doesn't work? Even bigger.

(If the incentives become unprofitable, then you probably have the wrong person in the position to do X.)

OH NOES! TOO MANY CLIENTS!

Say the big prizes are working off the heeeeeeeeezzzzzyy, and you're getting too many Fortune 500 client that you could handle. What do you do?

• Lower the incentives. Take stuff away from the big prize. You'll see motivation to bag big clients gradually decline, letting you/your-team sufficiently service your clients.

You just played BEN $&@^%^ BERNANKE of your own domain. Woohoooooo! High five!

Align your incentives, and change behavior for the greater good.

Incentives.

The landmark Dunning-Kruger study found:

• More confident students (those who thought they did super well on a test) score less.
• Less confident students (those who didn't think they did too well) score higher.

That is, confidence tricks us into misjudging our skills, which can $&@^%*+ up our finances off the frosheeeezzzzy (see: confident investors during housing boom, dot.com boom, roaring 20s, etc., etc., etc.)

Measure Yo-self

Think of an obscure subject you don't understand -- say fashion.

Human tendency? Because you're unfamiliar with the subject, and you haven't received feedback that your fashion skills suck, your mind becomes overconfident:

• "Oh! I know what makes great fashion!"
• "The fashion designers frickin SUCK!"
• "I can build a fashion empire if I want!"

BUT UH OH NO! You haven't studied patterns, color, design psychology, marketing, etc. -- so, you're unfamiliar with fashion's best practices that have evolved and been fine-tuned over decades/centuries by titans of the fashion industry.

Like most subjects, you get a reality check as you dig deeper into fashion and start seeing the complexities associated to the industry.

What Do You Well?

Think of something you've been doing for at least 5 years.

• You know the complexities associated.
• You're not as confident as you were when you started.
• You can spot fakers/pretenders/posers who think they know how to do X, BUT THEY DONT KNOW.

The more you know about X, the more you realize how much dumb you really are about X.

Google execs, for instance, don't know what the next big opportunity will be; they just focus on hiring the world's best people to ride an unpredictable future.

Talk to a startup n00b however?

Bam:

1. "My idea is the next big thing!"
2. "I'm already picking out Porsches and Pateks!"
3. "I can't tell you my idea, because if I do, you will make billions. Therefore, I will not tell you my idea so I can make the billions. THAT'S RIGHT SON"

Or take change-the-world college student Eddie:

• College student Eddie knows more about the economy than senior White House economic advisers.
• College student Eddie knows how to create more jobs than captains of industry.
• College student Eddie knows the Fortune 500 destroys small businesses without realizing that the bulk of every Fortune 500 company is made from an aggregate of many, many, many small businesses working together in one cohesive system.

The moment you find yourself super confident about something, SLAP YOSELF.

Then, dive into the complexities.

WIN

Humility.

During the housing boom, home prices skyrocketed to valuations based mostly on imaginary money (debt, a.k.a. other people's money).

So, you had an inconsistency between the inherent value of housing assets and the listed home prices.

What happened?

Take house-flipper Joe, intent on making it rich quick BECAUSE HOME PRICES HAVE ALWAYS GONE UP YAY YAY YAY HI FIVE

• He buys a house for $600K with no money down.
• He starts seeing his neighbors selling their homes for over $1M months later, increasing his own home to over $1M.
• "YAY I SO HAPPY!!!!!" Bob screams.

Housing bust happens.

• The market values his home now at $300K.
• Bob's running out of cash.
• "This home was worth $1M just months ago! I won't sell unless I get a price near that!! OH YAH! WOOHOO!!!"

Bob, not realizing a speculative market valued his home at $1M, holds onto the hope that one day his home will be $1M again.

That, unfortunately, won't come in his lifetime, as the rate of return on the home returns to the single-digit increases as it had been doing before the housing bubble.

Like Joe valuing his home purchase, your customers/employers probably valued your services or products at ridiculous prices during boom times, and had cash/credit off the heezy to pay you abundantly.

But now?

They're all facing the reality that the economy ran on imaginary money, inflating prices for everybody an everything.

Overleveraged banks are currently holding onto their toxic assets thinking that one day they can sell those assets for the inflated prices that they paid for them during the housing boom; if you live in the past like those banks, you will surrender opportunities to earn $$$ by trying to charge what you had been charging during the boom.

Get business easily by surrendering the S.U.C.K. past.

Lower your prices.

• You're growing quickly.
• "I can't manage this many people!" you scream.

That prevents you from scaling the company efficiently as team members wait for directions from above.

How Zynga Grows Quickly

Zynga (makers of Farmville, etc.) grew to over 500 employees in 2.5 years.

How did it grow quickly?

Every employee in Zynga is the CEO of something.

• Instead of relying on others, team members start taking initiative to rock what they lead.

CEO Mark Pincus used to manage over 100 people; now, every team member is self-directed and leads what he or she owns.

Every team member knows their role as CEO of X, ensuring accountability and leadership among every tiny facet of the organization.

CEO of something?

Take Bob. Say Bob is the CEO of generating leads; the company's ability to produce leads lies squarely on Bob:

• If the company doesn't produce leads, blame Bob.

So, Bob's role is to do anything and everything needed to produce those leads, as he's ultimately responsible for the number of leads his company generates.

That drives Bob to take initiative, set goals, recruit people, get resources, do the yaddas -- instead of relying on someone above to give him directions.

ToDo

Make each of your team members the CEO of something.

Scale efficiently.

WIN

CEOs.

The billion-dollar consumer goods industry thrives off of this model:

1. Discover a super affordable/obscure product that the masses would spend premiums on.
2. License/buy the product, and bring it to the masses.
3. WIN

WAT?

P&G and other Fortune 500s source their products like that one dude you know who travels overseas to some country you've never visited, and buys some obscure product to sell to the peeps in your country.

• That is, leverage your resources to find hidden gems that the masses would OH SO LOVE.

eBay Power Sellers

eBay power sellers, for instance, source their wares from years/decades of experience finding the right offshore partners, leveraging their negotiating skills that they've developed over the years, and bringing the sourced products to the masses.

The Quik Guide

The greatest lesson in investing in stocks applies to finding something to sell:

• Find a product that you can buy low, and sell high.
• (Or do/develop/invent/service cheaply, and sell high).

For instance, if you've been baking delicious shiny mother ^%^+^*= gourmet cookies for years that your friends/family/posse love, and you know how to find the ingredients/tools to do so cheaply, then you have a great product to sell to the people of this world.

Find something that is cheap to YOU that you can sell high.

WIN E.V.E.R.Y.D.A.Y.

Low. High.

1. You interview Schmo, who super SUCKS.
2. You interview Beebo, who's average.

What does your mind do?

Your mind experiences the contrasting/anchoring effect: Because Schmo super sucked, that made Schmo look super impressive in comparison.

So then you go:

• WOW BEEBO SUPER GOOD
• Hire! Hire! Hire!

Because your mind assesses the skills of two candidates based on comparisons, you mistakenly have a higher opinion on Beebo than if you had just interviewed Beebo alone.

Take a Car Dealership

You go to the dealership.

• First car you see? $100K
• Second car? $50K

The second car seems affordable. You can finance for it. Yay!

Now, let's say this happened instead when you first got to the dealership:

1. First car? $15K
2. Second car? $50K

DANGGGG SON THAT CAR ^2 = LUXURY. I CANNOT AFFORD

Your mind tricks you into judging X differently when X is really just the same thing based on faulty comparisons.

(It's how car dealerships make deals more attractive to you.)

Stopping your mind from tricking you when hiring?

Try interviewing/analyzing/comparing a BUNCH of candidates to prevent YOSELF and YO MIND from hiring based on misguided comparisons.

You'll start comparing candidates based on a fuller whole than just a small, distorted, sample -- to find the best candidate.

WIN

Bunches.