The Self-Made Billionaire Effect

WHY BILLIONAIRES SUCCEED

It’s possible to become a millionaire, thanks to a high-paying job in the right industry. To become self-made billionaires, however, takes something more, write John Sviokla and Mitch Cohen in their fascinating new book The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value. The authors label those who can succeed within the constraints of organizations or established systems, as performers. Billionaires, in contrast, are producers. “They envision something new,” the authors explain, “bring together the people and the resources to create it and sell it to customers who didn’t know they needed it.”

Researching the factors that differentiate self-made billionaires from everyone else, Sviokla and Cohen found that self-made billionaires were entrepreneurs who shared certain “habits of minds” that took form in what the authors term “dualities.” A duality is a set of two characteristics that complement each other.

Based on an in-depth analysis, augmented by personal interviews, of the history and personalities of the self-made billionaires on the Forbes list of the world’s billionaires, the authors identified five dualities common to all billionaires.

The Five Dualities

The first is empathetic imagination. Billionaires have the imagination to develop billion-dollar ideas. Those ideas, however, emerge from what the authors call “extreme empathy” for their customers’ needs and wants. For example, few people were buying mutual funds when 24-year-old Joe Mansueto began buying them in the early 1980s. Drowning in paper, after ordering the quarterly prospectuses from each fund he wanted to follow, Mansueto realized that investors would welcome a service offering a report that provided information for all comparable funds. Within two years, Morningstar was born.

While the first duality concerned ideas, the second duality, patient urgency, frames the billionaire’s perspective. Billionaires, according to the authors’ research, are uniquely comfortable with both urgency and patience. They can work fast and super slow simultaneously, depending on the needs of the situation. As the authors explain, “They urgently prepare to seize an opportunity but patiently wait for that opportunity to fully emerge.” Groupon founder Eric Lefkofsky, who had failed with an earlier ahead-of-its-time website, painfully realized the value of timing. He also knew that the social media layer of Facebook, Twitter and others had made the time ripe for a deal-of-the-day site such as Groupon, and forged ahead with the idea that would make him a billionaire.

The third duality, inventive execution, underpins how billionaires act. Execution is important, but that doesn’t mean that execution cannot involve creativity and imagination. Micky Arison, former CEO of Carnival Cruise Lines, turned the three-ship company of his father into the world’s largest cruise company, owning 10 established cruising brands. Through initiatives such as air-sea packaged charters, Arison reinvented cruising from a leisure activity for the elite to a mainstream vacation.

Billionaires are not huge risk takers, the authors write. But, at the same time, they are less afraid of what they might lose now if there is an opportunity to create enormous value in the future. Having been fired from two real-estate investment jobs, Stephen Ross knew trying to start his own real-estate development firm had little chance of success. But the enormous risk of starting his own company was smaller than the risk of trying and failing again to work within the constraints of another firm. It’s this duality of the relative view of risk — balancing opportunity vs. potential loss — that separates billionaires from mortals, according to the authors.

The final duality that exemplifies the mindset and approach of billionaires concerns leadership, or more particularly, co-leadership. Billionaires seek partnerships, the authors write, with people who have the skills or experience that they are missing, usually combining their producer skills with a “virtuoso performer.”

While the bulk of the book explores the dualities, the authors also detail, in this revealing, in-depth exploration into why billionaires succeed, the steps that companies can take to try to encourage and enable potential producers to succeed within their organizations — instead of leaving to start their own enterprise.

The Freaks Shall Inherit the Earth

“How to be as weird as you want while providing a viable business structure to support it”

This is what Chris Brogan promises to those that read his latest book The Freaks Shall Inherit the Earth.

Brogan continues “So, if you’re the kind of person who’s wanted to dig into entrepreneurship but hasn’t quite found the right way of hearing the story, this might be your book. It’s not about “the hustle” or “dominating” or “killing” anything. It’s about taking whatever makes you weird/different/unique/important to this universe, and helping you make a business interface that might help you do what you want to do a little better.”

So what is a freak, according to Brogan? Here’s is his definition:
• You don’t fit in without some serious effort.
• You are not a big fan of settling or compromising.
• You’re looking for ways to allow you weirdness to be an asset, and not as the deficit that people have tried to convince you it is.

If you fit that description, then you’ll want to join Chris Brogan and Soundview on March 3rd for a special Soundview Live webinar entitled, of course, The Freaks Shall Inherit the Earth. You’ll have the opportunity to hear Chris talk about how freaks can be successful in business in their own unique way, and to ask your questions during the webinar.

If you think you may be a freak, the CEO of your own cubicle, or an employeepreneur, you won’t want to miss this live conversation with Chris. Register Today!

Notes on Startups, or How to Build the Future

FINDING VALUE IN UNEXPECTED PLACES

When you start a new business in an industry that already exists, writes PayPal founder Peter Thiel in his book Zero to One, you are adding more of something to the world that’s already there. You are going from 1 to n, he writes. But when you start a business that is unlike any other business on the planet, you are truly creating something new. In Thiel’s terminology, you are going from 0 to 1.

And you want to be the “one.” Thiel is not a fan of competition — not just because of the required battle for customers but because competition makes companies focus on competitors more than customers. “If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most,” he writes.

Thiel uses the ongoing battle between Microsoft and Google as an example. Originally, he writes, there should have been no reason for a fight. Microsoft was operating systems and office applications, while Google was a search engine. Then the two companies developed an obsession about each other. “The result?” Thiel writes. “Windows vs. Chrome OS, Bing vs. Google Search, Explorer vs. Chrome, Office vs. Docs, and Surface vs. Nexus.” The battles were bloody, and the companies, Thiel writes, paid the price by watching Apple surpass them both in dominance. In January 2013,Apple’s market capitalization was $500 billion, while Google and Microsoft combined was $467 billion. “Just three years before, Microsoft and Google were each more valuable than Apple,” he writes. “War is a costly business.”

Building a Monopoly

For monopolies, the situation is quite different. You can charge the prices you need to make the profits you want. There are no competitors driving down those prices. It’s true, as Thiel explains, that monopolies would be bad if nothing changed: They could command any outrageous prices they wanted with no recourse for customers. But in the dynamic world of business, where unhappy customers represent an opportunity for a new competitor to enter the space, monopolies are motivated to create value for their customers, he writes.

There is no simple recipe for building a monopoly, but according to Thiel, there are several elements that entrepreneurs should look for. These include

Proprietary technology. As a rule, proprietary technology should be 10 times better than the nearest technology.

Network effects. This means other users are using the technology. Facebook works because everybody is on Facebook. But it’s important that early users still find the product valuable even on a small scale (e.g., Facebook was just for Harvard students at first), because it will take some time to scale any product.

Economies of scale. Not all businesses benefit from economies of scale. Going from one yoga studio to 10 doesn’t really yield economies of scale: you just need 10 times more instructors. The best startups have economies of scale built into the business model — Twitter, for example, can build up to 250 million users without making any significant changes to its operations.

Branding. You’ll want to create your own unique brand. But be careful to start with substance before brand.

To make these elements work in creating a monopoly, Thiel writes, you need to start small. Look for those groups of people who have a need that is not fulfilled by any one company. Avoid the big markets: Yes, there are lots of customers, but also lots of entrenched competitors. Once you have your niche market created, he writes, it’s time to scale up… carefully. eBay didn’t jump from Beanie Babies to industrial surplus. It continued at first to cater to small-time hobbyists until, Thiel writes, “it became the most reliable marketplace for people trading online no matter what the item.”

Beyond how-to steps, Thiel does not ignore the importance of mindset and thought processes. In one brilliant chapter, Thiel talks about those who have a definite view of the future (they know what is going to happen) and those with an indefinite view: the future is inscrutable, so why bother to prepare for it. To Thiel, indefinites rule the world. Entrepreneurs have a different worldview, however. They intend to make the future they seek.

Filled with insights ranging from financial advice to philosophical discussions, Zero to One is one of the most thoughtful books on entrepreneurship on today’s shelves.

Book Review: The Responsible Entrepreneur

The_Responsible_Entrepreneur

by Carol Sanford

Entrepreneurship goes beyond starting your own small business. Many larger businesses exhibit innovative and entrepreneurial ways of thinking. Anyone starting or bringing in new business fulfills the role of an entrepreneur. Carol Sanford brings her vast experience in helping executives and corporations to entrepreneurs looking to launch and scale a venture by mapping out four archetypes in The Responsible Entrepreneur. This book is now available as a Soundview Executive Book Summary.

“Archetypal roles provide a roadmap for taking on bigger challenges, making bigger promises, and focusing the energy and resources needed to get bigger results,” writes Sanford. The four archetypes are The Realization Entrepreneur, The Reconnection Entrepreneur, The Reciprocity Entrepreneur, and The Regenerative Entrepreneur. The archetype required to change an industry is a Realization Entrepreneur. The Reconnection Entrepreneur is the archetype required to change social systems. The Reciprocity Entrepreneur is the archetype required to change cultural paradigms. The archetype required to change connection to foundational agreements is the Regenerative Entrepreneur. By understanding what archetype aligns with your goals, you will learn how to grow your business into a powerful platform that can leverage change. Sanford provides readers with examples of how extraordinary people changed business for the better, including Kipp Baratoff, Annalie Killian, and Shainoor Khoja.

All four archetypes can be found in established organizations. Beyond learning how to leverage business with your archetype, you will learn how modern archetypes can alter the future. With The Responsible Entrepreneur, entrepreneurs can build businesses that will make the world a better place.

Purpose as the New Driver of the Economy

In my blog post on October 20th, I looked at a trend we’re seeing in business and business books focusing on purpose as the new driver of businesses and employees.

One book I featured was The Purpose Economy by Aaron Hurst. Aaron has experienced this trend first-hand as he developed into a purpose-driven entrepreneur, eventually launching Taproot, which creates a pathway for millions of professionals and Fortune 500 companies to volunteer for nonprofits.

Aaron introduced three types of purpose:
• Personal Purpose – we find purpose when we do things we love, attempt new challenges, and express our voice to the world.
• Social Purpose – relationships matter to humans. They reinforce our sense of value, require us to engage, and ultimately help us grow.
• Societal Purpose – purpose comes when we do something we believe matters – to others, to society and to ourselves.

If you long for purpose in your work and life, or if you want to engage your company in purpose-driven endeavors, then join us on September 30th as we talk with Aaron Hurst about purpose at our Soundview Live webinar The Purpose Economy.