How I Start Companies
My fastest-growing and most profitable business ever was the store the back of Ellen Nottingham's classroom at T.T. Minor Elementary School. I bought a box of pencils at a store near our bus stop, and Cy Keener and I sold them the next day at school for 15 cents each.
The next week, we diversified into erasers, pens, and paper. A month later, after expanding into higher margin, about 3 weeks of reinvestment, and annoying pink things that Cy claimed that girls would buy (he was right). We were netting about $20 per week, which was back when $20 meant something.
The partnership worked pretty well: Cy had a good idea of what peple would buy, and I was stingy with the money.
Initial investment: five dollars.
Read more: Lesson 1. Don't get a MBA
Business DevelopmentThis is just about the startup deal. Running an organization in which stakeholders are empowered to grow and contribute is a different story.
Business development is not selling a product. It's predicting what people will want, and then figuring out a way to deliver it. Success requires more than technology. Development is applied game theory, because for an idea to catch on, it has to be in everyone's best interests. As with any game worth playing, you start from a losing position. If you started in a winning position, someone else would have already done it, right? So, as with any game (in the Von Neumann-Morganstern sense), you can change the rules, change the facts, or change the players.
Most of the players aren't trying to manipulate the game, so all you have to do is let them know they're playing, and they'll find the Nash equilibrium on their own.
Read more: The Game of Business Development
- There is a goal, and we are moving toward it on a flaming bus.
- We are going Somewhere, but for now, we are in the middle of Nowhere.
- There is a driver. She's not quite sure where we are going, so she's moving us very fast in what we think is the correct general direction.
- A lookout watches for evidence of the location of the goal. The search space continually narrows.
- The engine is on fire.
- Someone is fixing it. We trust her to do that, because we are busy throwing sharp things at the people next to us, unless she asks for help, in which case we help her right away.
- The rest of the bus is on fire, too. We might get around to fixing that. Or not. Someone is watching it and will probably do something if it gets worse.
- The horde saw our smoke. They are chasing us. We must move very fast to get there first or they will stop us or cut us off.
- If you're at all close to us, you're going to get hit by something. You don't want to be beside us. You definitely don't want to be close behind. It's not particularly healthy to be in front of us, either.
- In fact, good places to be are a) on the bus, b) very far away, c) waiting for us at the goal, d) moving the goal.
- Most people will only do one of these at a time.
- Willingness to do both gives you moats.
- Use as little money as possible to prove that it works and that it makes money.
- Then use as much money as you need to scale as fast as you can before you lose your moats.
- Don't stop innovating.