This is a book a listen to every other month or so. It’s written primarily for artists but applies to absolutely everyone, especially entrepreneurs. You will find yourself repeating lines from it to yourself constantly. Continue reading “The War of Art by Steven Pressfield”
Every Valentine’s Day there are random people in front of a gas station selling last minute gifts.
Last weekend it was a couple with a table in the parking lot of a 7-11 with piles of Valentine’s baskets and big stuff bears wrapped in heart tape and such.
The killer app in the retail world of past decades was a box with stuff in in it. Like the Barnes and Noble I visited today.
Their core competencies were compiling large quantities of stuff, leasing tons of real estate and putting the stuff on shelves. The building was convenient to a lot of people so they went there to get the stuff. That was the simplest way to get things.
That’s what most retailers still are, especially the large ones. Real estate companies that buy stuff, put it on shelves and take your money.
To earn business today retailers have to do more than be close to their customers. The value of the proximity of the box is minimal. The only value the boxes provided before was proximity in a pinch. That’s their last remaining value. The couple selling Valentine’s gifts in front of 7-11 are hot on their trails.
We’re in the first inning of the one hour delivery game. It’s messy. But there is no doubt same day deliveries will replace the last valuable feature of big box retail in the next ten years.
If fast and close are no longer valuable to consumers, what do retailers do to earn customers’ business? More importantly which ones will realize this and change course before it’s too late?
A sober, slightly cynical, but incredibly powerful look at how some people interact with the world. Leverages historical examples to prove that the perspective is not, in fact, cynical.
Law 1 –Never Outshine The Master
Always make those who are above you in rank and position feel comfortable. Make them feel brilliant and powerful when opportunities arise. Even if you get the sense that your master loves you, don’t think that you can do whatever you wish. All higher ups want to appear intelligent, in control, and superior to those around them. Be cautious of your efforts to impress those above you as you don’t want to overstep your bounds to illicit insecurity of any sort. Your efforts may backfire and attract steep consequences.
“When it comes to power, outshining the master is perhaps the worst mistake of all.” – Robert Greene (R.G.)
“Never take your position for granted and never let any favors you receive go to your head.” – R.G.
Your friends will betray you quicker than your allies and enemies. Enemies are more loyal than friends because they have much more to prove. Although it’s easy to recruit friends in a time of need, you often don’t know who your real friends are. This is because the nature of friendship yields many pleasantries, but these acts may not be sincere. Friend or foe, develop the ability to judge who is the best to further your agenda. Keep friends as friends, but work with those who are intelligent and skilled. Never let your enemies upset or distress you because it’s better to know who your enemies are than not.
“Your enemies, on the other hand, are an untapped gold mine that you must learn to exploit.” – R.G.
Law 3 –Conceal Your Intentions
People trust appearances. Keep people guessing about your real intentions so that they can’t prepare a defense or anticipate your next move. If anything, lead them down the wrong path so by the time they realize your intentions it will be too late. Employ false sincerity and send ambiguous signals to disguise your true intentions. Honesty does more harm than good because it’s likely to offend people thus it’s much wiser to tailor your words.
“Deception is always the best strategy, but the best deceptions require a screen of smoke to distract people’s attention from your real purpose.” – R.G.
The more you say, the more likely you are to say something foolish and appear not in control. Powerful people influence and intimidate others by saying less. As a result, the less you say, the more powerful you appear because people won’t be able to decipher your true intentions. It’s a game of who speaks the least wins. Conversely, there are times when it’s unwise to remain silent because it can arouse suspicion.
“A person who cannot control his words shows that he cannot control himself, and is unworthy of respect.” – R.G.
One’s reputation is the basis of power and influence. With a solid reputation, you can get the upper hand, but without, you’re in a position of weakness. Make your reputation unquestionable while learning how to destroy others with weaknesses. Appearances in social circles and in public are very important. Be very mindful of how you appear in theses environments. In the beginning, you must establish and develop a sound reputation that people can know you by. Take the high road when others try to destroy your reputation. Furthermore, don’t let people assign a reputation to you by not caring. Own your reputation and mark.
“A solid reputation increases your presence and exaggerates your strengths without your having to spend much energy. It can also create an aura around you that will instill respect, even fear.” – R.G.
Law 6 –Court Attention At All Cost
Focus on attracting attention and standing out from the crowd because what isn’t seen isn’t heard. Do anything to make yourself appear larger than life, but never appear overly greedy for the spotlight. The latter can send signals of insecurity. Negative attention is better than being ignored, and attracting enough attention produces a special legitimacy. Keep an air of mystery about yourself to keep people guessing, but don’t let it turn into a reputation for deceit. Allow your sense of mystery to be playful and unthreatening.
Use the knowledge and efforts of others to further your own agenda. This will save you precious time and energy while making you appear a cut above the rest. If you prefer to do everything yourself, you won’t get far. Avoid doing things that you can have others do. Take credit and ensure others don’t take credit from you or piggyback your hard work. Keep in mind that there are times when taking credit in unwise such as taking credit away from someone above you in rank or position.
Allow people to come to you before making the first move. When they come to you, this puts you in a position to control the situation while wearing them out. Manipulation is a dangerous game and once someone suspects he’s being manipulated, it becomes harder to control him. Thus, always create the illusion that the other person is in control. The one who has control has power. Sometimes it makes sense to go to the other person. When doing so, force the issue and take the lead.
It’s much more powerful to gain alignment through action than argument. Argument does nothing but illicit resentment and ill will. The benefits of winning through action are twofold: no one gets offended and your point gets proven. Concerning power, you must learn to evaluate the long-term affects your actions have on people. Verbal arguments make sense only when you need to cover your tracks and deflect from a lie. Choose your battles wisely.
The people you choose to associate with is critical. Associate with happy and fortunate people and shun those who are miserable and unfortunate. Associate with people who attract happiness, good cheer, and intelligence. Associating with people who are full of misery will lead to your own demise. Make no time for these people. When you suspect that you’re in the presence of an infector, distance yourself and leave well enough alone.
To maintain your freedom and control, have people rely on you. Don’t ever teach them enough so that they don’t need you. The ultimate power is to get people to fulfill your commands, and you achieve this by creating dependent relationships. Do not value the idea of independence. Power involves at least two people and you will always need allies and pawns to serve you. The independent and self-reliant person can come and go, but he has no power.
“The completely independent man would live in a cabin in the woods – he would have the freedom to come and go as he pleased, but he would have no power.” – R.G.
Honesty and generosity brings down the guards of others. Using these tools as powerful distractions provides you with the time and space to do something they won’t notice. Taking something from someone is dangerous, even for the mighty, as the victim will no doubt plot his revenge. It’s dangerous to be upfront about what you need because this can attract resentment of your neediness. Learn to give before you take as it takes the bite out of future requests. Giving can take many forms: a gift, generous act, favor, or honest admission.
In your quest for power, you’ll constantly be asking others, more powerful than you, for help. If you’re looking for assistance, appeal to a person’s self-interest. Fulfillment of his self-interest will excite him to participate. Reminders of past good deeds are fruitless as people are generally not interested in others’ needs. There’s an art to asking for help that depends on your ability to read and understand people. Understand what people need, what would excite them, and what their interests are. However, some people get off on others asking them for help without appealing to their self-interests. In these cases, give them the opportunity for self-satisfaction.
Law 14 –Pose As A Friend, Work As A Spy
Keeping tabs on your rivals and competitors is critical. You must obtain valuable information on your own or through other sources. Learn how to probe for secrets and hidden agendas while being discreet. A friendly demeanor allows for this. During social gatherings and other encounters pay close attention to others. People have their guards down in these arenas allowing for valuable information to surface. Take caution and care as you probe as you don’t want people to end up avoiding you. Test people on certain acts to determine their loyalty. With this knowledge you can better understand their actions for the future. Just the same, be prepared for people to spy on you.
Law 15 –Crush Your Enemy Totally
Crush your enemy completely in body and in spirit. Show no mercy and crush them as they would crush you. Give them no options and know that negotiating leads to comprise. If you allow your enemies to stick around, they will seek revenge and look to rid you of your power. If you can make your enemies destroy themselves then allow for this to happen.
Ample supply drives prices down while scarcity drives prices up. Your presence and availability influence your perceived value. By making yourself less accessible, you increase the value of your presence. Although a strong presence increases value, too much presence decreases value and you become a habit of sorts. People will come to disrespect you more and more. Extend the law of scarcity to your own skills by making what you have to offer rare yet valuable.
“No matter how hard you try to be different, subtly, without your knowing why, people respect you less and less. At the right moment you must learn to withdraw yourself before they unconsciously push you away. It is a game of hide-and-seek.” – R.G.
Predictability gives others a sense of control over you. Conversely, unpredictability will force others to continually attempt to figure out your next moves. When people can’t figure out your next moves, they’re kept in a state of terror, confusion, and uncertainty. People are always trying to understand the other’s motives and patterns of behavior. Changing up your patterns on a daily basis will stimulate interest in you and keep people guessing. The more unpredictable you are, the more respect you’ll garner. Predictability can serve you well, when you have an ulterior motive underlying it.
Everyone has to protect themselves and although isolation may seem like a good idea, it exposes you to greater danger. For instance, it cuts you off from getting valuable information and it makes you an easy target. It’s better to be among people because a crowd will shield you from your enemies. Power depends on social interactions so isolation works contrary to this. To become powerful you must position yourself at the center of activity. All activity should revolve around you and you should be aware of what’s happening around you. Anything less could diminish your information sources and maneuverability.
You can’t ever assume that everyone will react to your strategies in the same way. Choose your opponents and victims carefully and never offend or deceive the wrong person. If you do offend the wrong person, he will spend his entire life seeking revenge. The ability to read people and know whom you’re dealing with is an extremely important power seeking skill. Without it, you will offend and waste your time on the wrong people. When it comes to assessing people, never trust your instincts and appearances. Rely only on facts.
Law 20 –Do Not Commit To Anyone
Do not commit to any side, cause or become obligated to anyone. Stay obligated to only yourself. The moment you commit, you’re obtainable and the magic is gone. Your independence will enable you to position people against one another while making them pursue you. Once you are possessed by others, you lose power over them. Stay aloof and you’ll gain the power that comes from their attention and desires. You must master your emotions and gain self-control. Do not succumb to the emotional volatility and problems of others. On the other hand, seem interested in their problems while inwardly maintaining your energy, sanity, and distance.
No one likes to feel dumber than the next person so the trick is to make others feel smarter than you. Once convinced, they’ll never suspect that you have hidden motives. It’s critical to never insult someone’s intelligence. To reveal your true intelligence rarely pays so you should develop a habit of downplaying it. This will give you unsuspecting power because your opponent will be disarmed. If someone comes to learn how smart you are, he will admire you more for being discreet about it.
When you’re weaker, surrender instead. This will give you time to recover and allow your opponents power to wane. Don’t give them the satisfaction of beating you. What gets us into trouble is our overreaction to activities by our rivals. Next time someone pushes you, don’t react, but yield instead. Turn the other cheek as this often neutralizes behavior. The surrender tactic is to appear as though you have yielded on the outside, but on the inside, you stay firm and plan your next moves.
“If you run away or fight back, in the long run you cannot win. If you surrender, you will almost always emerge victorious.” – R.G.
Law 23 –Concentrate Your Forces
Manage your resources and mind by keeping them concentrated and focused. Single-mindedness of purpose and complete concentration will overwhelm your enemy every time. Spreading yourself out, or too thinly, is a foolish activity. Latch onto a single and appropriate source of power i.e. a person. Conversely, tying yourself to one person can be dangerous. If that person leaves, dies or falls from grace, you will suffer.
“It is a corollary of the law of concentration, however, that much energy is saved, and more power is attained, by affixing yourself to a single, appropriate source of power.” – R.G.
Law 24 –Play The Perfect Courtier
The self-seeker thrives in a world where everything is about power and politics. If you apply these laws, there’s no limit to how far you can rise.
Laws of Court Politics
- Avoid ostentation
- Practice nonchalance
- Be frugal with flattery
- Arrange to be noticed
- Alter your style and language according to the person you’re dealing with
- Never be the bearer of bad news
- Never affect friendliness and intimacy with your master
- Never criticize those above you directly
- Be frugal in asking those above you for favors
- Never joke about appearances or taste
- Do not be the court cynic
- Be self-observant
- Master your emotions
- Fit in the spirit of the times
- Be a source of pleasure
Law 25 –Recreate Yourself
Do not accept the roles that society has assigned you. The character you are born with doesn’t have to remain. You must recreate and own your identity to one that commands attention and that is interesting. Remake yourself into a person of power. The first step in the process of self-creation is self-awareness. Being aware of yourself leads to change in appearance and emotions. Develop the ability to play different roles and become adaptable as the moment requires.
Law 26 –Keep Your Hands Clean
It’s imperative that you’re seen as someone with a clean record. Maintain this appearance by using scapegoats and blaming others. It’s human to look at one’s own mistakes, guilt or crime, but get in the practice of projecting these onto someone else or some object. You may lose a friend, but it’s more important to hide your mistakes. You can always replace a friend.
You may think that appearing to work harder than everyone else projects power, but it implies weakness. Why are you working so hard, if you’re so powerful? Perhaps you have to apply more effort or you don’t know how to delegate. The truly powerful appear to work effortlessly and never seem to be in a hurry.
People have an overwhelming desire to believe in something. Become their belief by offering them a cause or faith to believe in. Keep your words vague, but full of promise and hope. Give your followers rituals to perform and ask them to make sacrifices on your behalf. Your new belief system will then bring you power.
Create a cult in five easy steps:
- Keep it vague; keep it simple
- Emphasize the visual and the sensual over the intellectual
- Borrow the forms of organized religion to structure the group
- Disguise your source of income
- Set up an “us versus them” dynamic
Law 28 –Enter Action With Boldness
Don’t attempt a course of action you are unsure of. Your doubts will negatively impact your execution. Shyness is dangerous so it’s better to enter an action with boldness. If shyness has taken root, eliminate it. Boldness can make people feel at ease because it highlights confidence and self-awareness. Everyone admires those who are bold and no one honors the timid. Most of us want to avoid tension, confrontation, and conflict because we want to be liked by everyone. Many of us contemplate bold actions, but only a few of us act on them. The people who don’t act are terrified of what others might think.
Law 29 –Plan All The Way To The End
Plan all the way to the end while taking into account as many variables and exceptions as possible. Think far into the future and you will not be overwhelmed by circumstances. Most people are too imprisoned by the present to plan with any real foresight. Any plans that they do have are vague and based on imagination, not reality. The ability to overcome the present by envisioning and planning your future leads to power. The power comes from no longer being tempted by emotion, distraction or desire to improvise. You will see the ending and you won’t tolerate any deviations.
“They may believe they are thinking all the way to the end, but they are really only focusing on the happy ending, and deluding themselves by the strength of their desire.” – R.G.
Your efforts must appear natural and easy. People will think you have more to offer with more effort, and no one will be able to gauge your true potential. All the hard work and practice that goes into your excellence must be concealed. The more mysterious your actions appear, the more awesome your powers seem. You’ll appear as the only one who can do what you do portraying exclusivity. Avoid the temptation of working hard because it only raises doubt and questions. Teach no one your tricks as they will be used against you. Never show your work until it is complete and never take yourself too seriously.
The best deception is the one where you make it appear as though others are in control when in fact you are. Give people self-serving options that benefit you in the end. When examined closely, the choices we have in elections and jobs are actually limited. They’re really a choice between option A and B, not C through Z. A couple options offered usually do the trick on most people who consider nothing more. That said, the idea of “unlimited options” sounds promising, but so many options would only paralyze and confuse us. Our limited range of options comforts us. As a result, providing a narrow range of choices should always be part of your arsenal.
“Words like “freedom”, “options” and “choice” evoke a power of possibility far beyond the reality of the benefits they entail.” – R.G.
Law 32 –Play To People’s Fantasies
Never appeal to truth or reality unless you’re prepared for the anger that will follow them. People flock to manufactured romance and fantasy. Tap into the fantasies of the masses that will release them from their imprisonment, but keep the fantasies vague and ungraspable. The person who can create and spin fantasy out of oppression will amass untold power. Let’s examine a few realties and fantasies that have remained constant:
- Fantasy: A sudden transformation will bring a total change in one’s fortunes, bypassing work, luck, self-sacrifice, and time in one fantastic stroke.
- Reality: Change is slow and gradual. It requires hard work, a bit of luck, a fair amount of self-sacrifice, and a lot of patience.
- Fantasy: We can enter a totally new world with different codes and the promise of adventure.
- Reality: The social realm has hard-set codes and boundaries. We understand these limits and know that we have to move within the same familiar circles, day in and day out.
- Fantasy: People can come together in a mystical union of souls.
- Reality: Society is fragmented and full of conflict.
- Fantasy: A sudden reversal of this intolerable fact.
- Reality: The dead cannot be brought back and the past cannot be changed.
Law 33 –Discover Each Man’s Thumbscrew
Everyone has a weakness likely tied to an insecurity, emotional need, or pleasure. Once you discover the other’s weakness, you can use it to your advantage. Don’t take anything such as appearances at face value, look deeper. In searching for a person’s weakness consider the following methods:
- Pay attention to gestures and unconscious signals
- Learn about their childhoods
- Look for contrasts in their appearances “the uptight are often screaming for adventure”
- Find the weak link in their network
- Fill their void
- Feed on uncontrollable emotions
The way you carry and present yourself will often determine how people treat you. For example, if you want to be treated like a millionaire, dress and act as a millionaire would. If you want to be treated as a commoner then dress and act like one. It’s up to you to determine your own self-worth. Ask for more or less and you will receive the corresponding. If you believe you are destined for great things, your beliefs will radiate outward and great things will come. However, in your greatness never make the mistake of thinking that you can elevate yourself by putting down others.
Law 35 –Master The Art Of Timing
Never seem to be hurried or in a rush as this displays a lack of control and poor time management. Keep an eye out for trends that you can take advantage of. Taking advantage of trends is one way to develop power. On the other hand, appreciate when the time isn’t right to act and only act when the time is right. Time depends on perception which can be altered. Alter your perception of time to open up future opportunities that the fearful and angry close off.
By acknowledging petty problems you give them legitimacy and credibility. What you do not react to won’t bring you down. The more attention you give to an enemy, the stronger you make him. It’s occasionally best to leave well enough alone. An uncontrollable desire makes you appear weak, unworthy, and pathetic. If there is something you desire but cannot have, show disdain for it. The less interest you demonstrate, the more superior you seem. Furthermore, the more you want something, the more it will elude you.
Law 37 –Create Compelling Spectacles
Put on big spectacles for those around you and use them as distractions to conceal your true agenda. Visual spectacles that tug at people’s emotions are best.
“Words stir up arguments and divisions; images bring people together. They are the quintessential instruments of power.” – R.G.
If you show that you are not with the times with unconventional ideas, people will just think you want attention and they’ll look down at you. It’s much safer to blend in and go with the flow. Much power can come from blending in the short term while changing strategy over the long term. Share your uniqueness with close friends and those who will understand and appreciate it. We all tell lies and hide true feelings because complete freedom of expression is socially impossible.
“Wise and clever people learn early on that they can display conventional behavior and mouth conventional ideas without having to believe in them.” – R.G.
Law 39 –Stir Up Waters To Catch Fish
Always stay calm, collected, and objective as anger and emotion can work against you. Making your enemies angry while you remain calm can work in your favor. Tantrums don’t intimidate or inspire loyalty. They only create doubt and uneasiness about your power and self-control. Angry people usually end up looking ridiculous because their response is hardly ever justified. Additionally, it’s comical to see how sensitive they are and how much they take things personally.
“Petulance is not power, it is a sign of helplessness.” – R.G.
“We have to realize that nothing in the social realm, and in the game of power, is personal. Everyone is caught up in a chain of events that long predates the present moment.” – R.G.
Law 40 –Despise The Free Lunch
What is offered for free is dangerous because it’s usually tied to a trick, hidden obligation, or agenda. The powerful are always mindful of this. What is worth something is worth paying for and by paying your own way, you remain free of gratitude. Keep your money circulating as generosity is a sign and magnet for power. Friends that offer something for free will no doubt claim repayment later. People are essentially lazy and want wealth to fall in their laps rather than work for it. Lure people with advice in exchange for a small sum. Your advice should concern how to make easy money while you employ more deceptions still.
If you succeed a great person, you will have to achieve much more to outshine him. Don’t get lost in his shadow, but rather establish your own name and identity by changing course. Power depends on the ability to fill a void.
Problems and troubles can usually be traced to a single person. If you allow these troublemakers to behave as they do, they will influence others. Don’t wait for the problems that can multiple from these people. Neutralize them as soon as possible by isolating or getting rid of them. In every group, one or two people are in power and people will surround themselves around these people.
“Powerful people never waste time. Outwardly they may play along with the game – pretending that power is shared among many – but inwardly they keep their eyes on the inevitable few in the group who hold the cards. These are the ones they work on.” – R.G.
You must influence others to work in your direction, and anyone who you seduce becomes your pawn. Appeal to their hearts and self-interest, but ignore thee emotions and minds of others and they will grow to hate you. In order to persuade others, soften them up while breaking them down gently. Keep in mind that power is a numbers game. The more widespread your support, the stronger your power.
A mirror reflects reality and it’s also a perfect tool for deception and concealment. When you mirror your enemies’ activities and do as they do, they won’t be able to figure you out.
Mirror Effect tactics:
- Neutralizing effect: doing what your enemies are doing as to blind them from your true actions
- Narcissus effect: mimic the other person psychologically, not physically to entrance your enemy
- Moral effect: do what the other has done to you as in an “eye for an eye”
- Hallucinatory effect: create a copy of a person, thing, or place to deceive others
The need for change is important, but so too is the need to slowly transition from old to new. People are creatures of habit and tend to want to cling to the past no matter the proposed change. Build your power on a solid foundation of the past rather than trying to cut it out completely.
“Human psychology contains many dualities, one of them being that even while people understand the need for change, knowing how important it is for institutions and individuals to be occasionally renewed, they are also irritated and upset by changes that affect them personally.” – R.G.
Law 46 –Never Appear To Perfect
Appearing perfect and better than others is always dangerous. Occasionally display defects in order to appear more human, relatable, and approachable. After all, envy creates enemies. Once envy is there, display the utmost disdain for those who envy you. Trap them in your envy by displaying your superiority as this will make them squirm.
Never let success go to your head and cause you to be arrogant or overconfident. Going too far will surely attract enemies. When you’ve reached your goal, stop.
“Luck and circumstance always play a role in power. This is inevitable, and actually makes the game more interesting.” – R.G.
Law 48 –Assume Formlessness
Remain adaptable and on the move, and be fluid and formless like water. Do not accept the idea of permanence as nothing is certain or fixed. By taking shape you expose yourself to attack. Power thrives in flexibility, maneuverability, and adaptability.
“The powerful are constantly creating form, and their power comes from the rapidity with which they can change. Their formlessness is in the eye of the enemy who cannot see what they are up to and so has nothing solid to attack.” – R.G.
Jeremy Phillips missed a very important point in his Friday NYTimes piece The Rise and Fall of the Unicorn. It’s a point most overlook when considering the impact of a number INFLATES MARKET.
He pinned most of the valuation frothiness on a winner-take-all mentality. That if you back a single power-horse, the market return potential is exponential. This is true with one caveat.
A great number of the “unicorns” in focus are businesses with complex supply chain unit economics. These are businesses where the company does not control huge components of the fully loaded costs to deliver its services, the only control what they pay for it before selling it to a user, theoretically at a markup.
A black and white illustration is Uber. It controls price and what it pays drivers per mile, per pickup and as a minimum guaranteed hourly rate, for example. It does not control the cost of the car, gas, insurance, etc..
The theory in scaling is, as proven historically by businesses like Walmart, scale applies pressure on components in the supply chain all the way to the raw good (e.g. the metal in the car). And thus any imbalance between the cost the company wants to pay and the true cost of the product it is buying (e.g. Uber: buying the ride from the driver, Walmart: buying the toy from the manufacturer) will be short-lived. Market forces will solve the imbalance.
This approach works in markets where the company (e.g. Walmart) is by far the largest buyer of the good. What Walmart does will ripple through the supply chain and drive production costs down.
The flaw in Phillips’ piece and in most analysis like it is that it ignores the true supply chain costs of higher profile companies like Uber, HomeJoy, DoorDash and Instacart. It costs more for a human to deliver the service than the service is paying them. And the human cannot reach into his/her supply chain and push down costs. It takes X minutes to get from A to B with $X in gas in an asset that costs $X/day.
None of these companies will, for a very, very long time, have the scale to impact global oil prices or the macro cost to produce cars.
Why does this matter? Because when these companies operate at scale delivering a unique and mostly new product at an artificially low cost, they train consumers to believe that the product is only worth X. So even if competition is squashed, if the supply chain isn’t cheaper, then the subsidies must continue. Otherwise, consumers will balk at paying the true cost of the product and flock to alternatives.
When you invent a product and deliver at scale, you create the market perception of what that product *should* cost. And if you do that you must be sure your scale can drive down cost or your subsidies can continue in perpetuity. Otherwise, you’re toast.
When you sell memberships that guarantee a physical service, you are mostly in the business of financial engineering.
The price you charge has to cover your costs and generate a profit but has to be low enough to make signing up seem like a good deal.
It is in your best interests that customers use your product as little as possible so that you can sell more memberships. The higher the member utililization, the higher your costs. Your business is a promise to provide a service, on-demand, X times per month (or in some cases unlimited).
If you don’t provide the service reliably or if its availability is constrained, your members will be unhappy and stop paying you.
Memberships are very popular in capital intensive categories. Gyms, vehicle use, aviation and now homes.
Don’t be fooled by marketing, the primary goal of any company that sells membership to a physical place or experience is minimizing the amount you use the product. In these capital intensive businesses, costs do not scale in a linear way. If demand outpaces supply, the cost of more supply is generally large and jolting (e.g. buying a new plane, building a new gym, building another house).
Consumers react well to memberships for additional access or a higher level of service. The irrational fear of diminishing returns pushes them to use the product more. This works well for products otherwise available with no membership but more accessible with a premium membership. The most successful example, perhaps in history, is Amazon Prime.
But memberships for access alone are risky. There are few companies in history that have done it well. For reference see the history of the gym industry.
I stumbled onto this question on Quora:
My startup has traction, revenue ($600k/year), and profit!
It is a scalable model in a multibillion dollar industry.
We are based in the US, with 2 co-founders (CEO/CTO), mid-30s.
We approached 87 potential investors. Even with a soft introduction, we don’t even get an answer.
This was my answer. I want to print it on a t-shirt.
There’s a common misperception about the business VCs are actually in. This doesn’t apply to angel investors and people who invest because they want things to exist.
VCs are as much in business as you are. They find investors to give them capital to invest. Their business is finding companies that will have outsized returns as a result of venture capital investment.
In evaluating whether to invest, the questions VCs ponder aren’t limited to whether they think a business is fundamentally strong (a bootstrapped, profitable business absolutely is). VCs have to assess, as best they can, how quickly the business can grow to critical mass where the marketshare and/or product is attractive at a high valuation to a potential acquirer.
There are investors who love businesses like yours. On a personal level I am one of them.
You wouldn’t feel slighted by an airline gate agent if he/she didn’t invest. That’s because it’s not their job. And VCs have a job.
Look for investors investing their own capital who have a track record of investing for the long-term in businesses they think *should* exist. And be prepared to show how 1 dollar in leads to X dollars in return for the business.
A great story to google is from the founder of grasshopper (who just started a fund to focus on these types of businesses, btw). Look it up.
The role of government regulators grew in the early part of the 20th century. Regulators serve two purposes, sometimes but not always concurrently: Protect workers and protect consumers.
Their rise made sense at the time. Companies like Standard Oil were dominating markets and using their dominance to artificially create inflate profits, harming consumers. The Sherman Antitrust Act specifically targeted such companies and gave the FTC the power to intervene to protect consumers on a macro level.
The story of taxis in Las Vegas took a different path. The barrier to entry into the Las Vegas taxi market in the 1950s was so low that anyone could get into the business. Because there were so many taxis drivers competed on price. As always happens in price-sensitive markets, eventually pricing pressure pushes down the quality of the product. In this case that meant that cars got less safe, drivers were more careless and as the market evolved, riders were very much in danger. The regulators established and enforced safety standards by requiring licenses to operate. And safety improved.
In the case of every regulated market the regulation morphs over time from safety-oriented to market protection oriented. I don’t think this happens intentionally but it always happens.
What at one point was a regulator focused solely on consumer safety turns into one that regulates pricing and decide who can enter the business. The regulator thinks those things keep consumers safe. But the process always get skewered.
Regulators use licensing and application requirements to slow market growth thus protecting pricing from huge swings. Rarely do they accomplish this without unduly blocking access to markets from nearly anyone.1
In Nevada, for example, new applicants for a transportation license must prove market demand and disclose pricing in their applications. Any existing provider may object and if they do, procedures essentially block the new participant from the market. A potential competitor may simply object to your desire to enter the market and, poof, they win.
Economics relies on competition to push companies to innovate. The role of the regulator should be to set and enforce safety standards. The concept of a regulator protecting drivers, for example, from low pay is no different than a regulator setting the price for real estate. If the price for a safe product gets too low to provide that product, people will stop selling it. The market will correct itself.
It is not the role of the regulator to stop that process. The regular’s job in a competitive market is only to ensure that as prices drop, safety does not.
1The history of the trucking industry is such a fun example to read about. “a frozen dinner with a hamburger patty instead of a chicken leg requires trucking rates that are 20 to 25 percent higher”