This post is a part of a series of AMA questions that I receive on my AMA Telegram Channel.
Question: What are the fundamental elements of success in business in your opinion?
If the question is about financial success or maximizing profits – then the answer is very simple. All we have to do is to look at Economics. See, in either a free-market (no truly free market exists) or even in a competitive market (most markets are) – making a profit is seen as an exception and not the norm.
In the absolute basic terms, the theory is very simple. If you or anyone else creates a product that makes your company profitable – it will attract competition that will do what you do, but cheaper or with a twist that will give them a cut of the market. Eventually – the amount of these new companies will ensure that no excess profit is generated by anyone, the price will arrive at the “correct” market price and everyone will run their business at more or less break-even point or a point that is enough for the founders to keep trying.
Therefore the only fundamental things you need to do in order to be financially successful is to do one of the following things:
- Enter an existing market with a lower price point because you figured out an efficiency hack. (Airbnb)
- Create a differentiated product from the competition, this will give you a temporary position of power until competition copies you or buys you. The most common reason startups are actually bought. (Instagram)
- Create a new market with enough demand, and sail the profits as long as possible (Computers, Apple)
- Enter a noncompetitive market. Basically – create a monopoly or an oligopoly. Common ways of doing this: control the supply side of your product, create extremely high barriers to entry (IP Rights, Knowledge, etc.), extremely high entry costs (sending rockets to mine asteroids), government intervention (you are the only selected supplier for a country), etc.
This might not be the answer you were expecting, but it is an important one. All too often startup founders do not grasp the basics of economics and try to enter a market without having any sort of advantage out of the ones described above. Thus, they are bound to fail to make any profit from the start (But could still be bought out by competition). Just getting the above right will set you far above the rest and save you countless amount of time. Just remember, given enough time – profits will always go towards zero unless you have some sort of an unfair advantage and that is very hard to keep for a long time. That said, it is still possible to enter a market, break-even the company and have a nice salary while at it.
That said, financial/business success is an extremely boring metric and is not very good at helping us, as a society, to move to the next level of understanding what we actually need to collectively do in order to move to the next stage of evolution of our civilization. Therefore, what I am interested in much more are the fundamental elements needed in order to be “successful” in terms of pursuing a worthy goal that will affect as many people as possible.
For that, I currently find the following few things to be of most importance. The list can and will change with time:
- Identify a problem you want to solve for the rest of your life. Your purpose.This should not be a materialistic goal, but something you are willing to do for the rest of your life – no matter how small an impact you will make. However, your aim would be to try to make as big an impact on our collective world as possible. Here is a link to my article explaining this in more detail.
- Take constant action towards your purpose.Now that you know your purpose – it makes very little sense to procrastinate, to be lazy, or to have some sort of “fear of success” or “fear of not being enough” preventing you from taking action to make an impact. Good entrepreneurs take a lot of actions on a daily basis. They do not wait for the world to come to them – they go out there and make things happen.
- Take full responsibility for your life. To the extreme.
Good entrepreneurs do not make excuses. They are the captains of their ship and their life. My father is a sea captain, and he taught me that a good captain takes all the responsibility. Even if a sailor makes a mistake without the captains direct involvement – it is still the captain’s full responsibility. This happened to my dad when a sailor made a mistake that cost the company over 2 million EUR – and my dad immediately took full responsibility for hiring such an absent-minded person and took action in order to make sure that the hiring process would never allow it to happen again. Those who do not take full responsibility would never realize the hiring process problem and would simply fire the sailor and blame it all on them – only to end up in the same problem two months later with yet another sailor who is also not up to par.
- Live in the now.
This might sound a little bit on the “hippie” side, but I truly believe that being present in the moment is a sign of a good entrepreneur. Those who do this – re-evaluate the current situation of their company and their life on a moment-by-moment basis. If some new information comes in – they might change course or grab an opportunity that presented itself. They will not continue driving their company to extinction just because they made a decision 5 months ago that is clearly not working anymore. Nor will they be driven by future dreams, if the market is clearly showing that a change of direction is needed.
- Have a flexible mind.
Most dangerous beliefs are the ones you are not willing to question. Good entrepreneurs know this and are always willing to re-evaluate their positions. That is not to say that they are easily swayed from their path, but they are willing to question everything at the right time.
As a summary – I feel it is much more important to not strive purely for the financial success, but for your success as a human that is on a path to making our civilization better as a whole by solving a real problem.
As an exercise – try to come up with a list of five potential goals to have that have no “ending”. That is to say – goals that you can keep on doing forever, no matter how much. Examples: 1. Help improve world education systems. 2. Help increase average intelligence of the world. 3. Help people become more aware of their role in the world.
Once you have the list – create five mini-actions for each, that you can do already within one month. Do at least one from each goal and see what happens.