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Imagine the world 10,000 years ago. Our hunter gatherer ancestors roamed the earth; scraping together what little food they could find, and avoiding dangers that could claim their life at any moment.
Now fast forward 10,000 years. The descendants of those very same tribes live in air conditioned homes, with clean water piped in directly. Our lives now are far more secure and predictable than our ancestors could have ever fathomed.
While our environment has changed greatly, we have not. Our brains are still programmed for life outdoors. Our instincts have trouble adapting to a paper-shuffling, domestic lifestyle.
For this reason we see epidemics of depression in office workers, and "ADHD" in school children.
Evolutionary Arbitrage – Creating products that are friendly to, or exploit human instinctual nature.
What are some examples of evolutionary arbitrage?
Nintendo Wii – The Wii transformed video games from a sedentary pastime to a full blown activity, selling 30M units in the process.
Hummer Brand - Nothing satiates a reptilian subconscious like climbing a 60 percent grade or fording 24 inches of water.
4 Hour Work Week – Millions of people are fed up with sitting in a cubicle from 9-5 and are working from wherever life takes them.
Sometimes thinking about the future means studying the past.
90% of entrepreneurs are ready to jump in and start building their product right away. They have a great idea for a product, their friends have told them how good it sounds, and the last step to becoming the next entrepreneurial success story is to build the product and start selling, Right?
Wrong
The reason so many entrepreneurs fail is that they don’t validate the market. They practice a ready, fire, aim development style. Successful entrepreneurs practice ready, aim, fire by validating the market.
Market validation compensates for most of the risk of entrepreneurship.
Once risk has been mitigated; your venture will give you the profitability of a start-up with the security or an investment.
And that is the most important lesson.
Read on for an explanation of Market Validation from the second chapter of Rob Adam’s book: A good hard kick in the Ass, Basic Training for Entrepreneurs. Rob Adams works with Austin Ventures, providing venture capital to start up companies. His book provides a valuable perspective through the eyes of a professional VC. While the whole book is a valuable resource; the most valuable section, by far, is the second chapter on market validation. The chapter is titled you don’t know your customer as well as you think you do.
Continue to...
Building a product without market research is like shooting a gun without aiming.
The Benefits of Market Validation:
1. You get the product right the first time
Instead of spending $10 million on a prototype that has to be redesigned, you spend $1 million and get the product right the first time
2. A beta community emerges
You gain a community of customers that will give you feedback during product development
3. You identify a wide potential Customer Community (Quality sales leads)
4. You can more easily raise smart investment capital
Market research, customers, and development communities eliminate risk and make smart VC’s eager to invest.
5. You clarify your competition
Market Validation Consists of four steps
Secondary Research
Stage 1- Explore the Pain
Stage 2 - Envision the Solution
Stage 3 - Establish Credibility
 As the pyramid suggests, key validation activities include:
Identifying research contacts
Obtaining progressively more useful research
Contacting hundreds of people
Secondary Research
- Research competitors and potential customers using the internet
- Read the Industry press, including Information Week and Red Herring for a sense of current technology trends. Also, check out vertically focused periodicals in the industry being targeted.
- Obtain reports from respected analyst groups, such as Forrester Research, Gartner group, Giga, International Data Corporation (IDC), Meta Group, and others.
This research does not qualify as market validation, it merely prepares you for...
Market Validation Stage 1: Explore the Pain
Stage 1 involves three steps
1. Construct hypotheses about the prospective market.
Who needs the product most? What does this market look like?
2. Gather data to prove or disprove your hypotheses
3. Isolate the most searing pain points
Who needs the product most? What does this market look like?
Examples: The product is critical for companies growing at 50% a year or faster; ten to twenty people communicate with customers. Or, product is most appealing to young professionals living in urban areas.
Typically, you obtain your Stage 1 interview contacts via mailing lists from industry trade magazines or trade groups. Interviewees should include the full spectrum of people who may come in contact with your product-those who will use in, buy it, recommend it, pay for it, technically review it, and so on. All these groups have requirements. Your task? find out what those requirements are.
When interviewing, watch out for two unproductive interview tactics:
1. Leading the witness. Don't ask questions in a way that makes it more likely to get the answer that you want. Like "Don't you hate it when..." or "wouldn't it be better if". These questions will retrieve answers that are not objective.
2. Selling the solution. Do not talk to customers about the solution at this stage. You are after only one thing: a clear view of customer experiences and environments, requirements for performing a particular task, and the source of customers' most intense pain.
A hypothesis almost never holds up. “you know you are getting close to the right answer when you’ve radically modified where you started.”
Market Validation Stage 2: Envision the Solution
Stage 2 involves testing one hypothesis against people who experience the pain firsthand, or understand that pain. Stage 2 is more qualitative than Stage 1, It involves some face to face meetings. Stage 2 contacts are people who, in stage 1 interviews, expressed especially distressing pain, a high degree of interest in a possible solution, and a willingness to be contacted again.
You can also consult the heat map’s hot spots for additional customer contacts. You might be amazed by what happens. Even when you call hot spot contacts you haven’t spoken to before, they might want a solution so desperately that they’ll ask for a demo-right now. Thought leaders within the market space make good stage 2 candidates as well. In interviewees, having pain is more important than entrepreneurial enthusiasm.
Preparing for stage 2 interviews
Using the stage 1 market data, create:
· A first pass presentation. The presentation outlines the pain you will address, the market segment with the most biting pain, and – at a very high level, how your solution can solve this pain.
· A prototype of the solution. Screens illustrate the user experience and provide a high level demo of basic functionality.
While conducting interviews, your team hits each one of the stage 2 contacts with the presentation and prototype. All the while, you carefully record their feedback. Initally the influencers will inevitably respond less than favorably to all or part of your proposal. Your team must simply go back, tweak to reflect the feedback, and iterate through the process again. You will focus on features that your customers care about.
Stage 2 results are indispensable, in three key respects:
· Product features – when customers are tormented by their pain, a quick solution is all they want. They’re not really interested in bells and whistles.
· Core Customers. – the customers you interview in stage 2 will morph into beta sites for testing your initial release. The interviewees of stage 2 tend to stick with your startup. They will act as partners who help keep you close to the customer as the years go by.
· A fine tuned presentation and prototype. Stage 2 feedback enables your team to sharpen these critical artifacts to the point where, when the “heavy hitters of stage 3 are approached, these leverage influencers quickly understand what you are doing - and are more than willing to lend their stamp of approval.
Market Validation Stage 3: Establish Credibility
By the time a startup enters stage 3, it is about 90% there in terms of being ready to set sail as a viable venture. You use stage 3 to forge that final 10%. Here, your team creates a base of influence for building credibility
Stage 3 is meant for contacting thought leaders interviewed in stage 2, representatives of well known analyst firms such as, Aberdeen group, forrester research, gartner group, giga, idc, and meta group, editors of vertical publications that sell into the market. Consulting firms such as Accenture, eds, kpmg, or pricewaterhouse coopers, whose clients may be in a position to implement the proposed solution.
As you visit these people with your fine tuned company presentation and solution prototype, here’s what you aim to do:get them excited. Excited about your company, about the product, and about your startups prospects. Give your presentation and collect feedback. Hone the presentation until it expresses your solution’s advantages with absolute clarity and conviction.
The process is worth it for three key reasons:
· Visibility in analyst reports and publications. Industry analysts are paid to spot new trends and promisiong companies. Theyre more than happy to spread the word about any new company that impresses them. So are the editors of publications.
· Revenue possibilities. Consulting firms love to introduct new technology solutions that make a read difference in their client environments. They also like to be the first on the trigger with this.
· Easier financing. You can incorporate positive analyst feedback into the presentation you use to obtain major financing from top tier investors. When raising money,a positive quote from a well known analyst gives you an enormous advantage.
By the end of stage three, your companies case is no longer hypothetical, it is proven. Your market is precisely targeted. Customers are already on board as advocates, partners, and advisors. Major industry influencers are in the loop and excited. Your team can progress with the confidence that it is addressing the market’s actual needs.
 You are probably wondering, How is it possible for a single truck driver to make 2 million dollars a year?
I'll answer that question with another question, How is it possible for Exxon Mobile to make 39.5 Billion dollars in a year?
The answer is arbitrage; when something is worth more in one location than somewhere else.
Back to the truck driver, he is an independent contractor that works with BP. His job is to drive around Italy, fueling the underground tanks at BP stations. After fourteen years on the road he decides that his truck is getting old and that it's time to sell the old and lease a new large capacity rig. He finds a buyer, in Egypt that will pay a good price for the tanker. So the trucker takes a week off to escort his truck on a boat to Egypt.
When he arrives in Egypt, the trucker notices that the price of gasoline is a mere .95 cents per gallon. (Global gas prices listed here.) He thinks about how great it would be to buy gas at .95 cents in Italy. Then it hits him...
He postpones the sale of his tank truck and uses his savings to fill the truck with 8,000 gallons of unleaded gasoline. He catches another ferry back to Italy and sells the load to an independent gas station for 4X what he paid for it. He can't believe how his good fortune, he has made almost a years salary in just a few days.
How does he make 2 million a year? Let's look at the math,
8,000 Gallons of gasoline costs $7,600 in Egypt
8,000 Gallons sells for $47,600 in Italy.
That mean that the Egyptian gas can be sold in Milan for $40,000 Profit.
Or $4.00 profit per gallon.
The distance from Cairo to Milan is 1599 miles.
Let's say that you take a ferry that travels at 20 knots or 23 mph, It will take you about 69 hours if somehow you had to travel the whole distance by boat. (realistically you could drive up the Italian peninsula at sixty mph)
Add in a few hours for filling and emptying the tank, waiting at the border, and you can complete an entire cycle in a week. (144 hours) If you complete one cycle per week for a year, that's
$2,080,000 annual gross profit.
As if that wasn't exciting enough, the process really gets interesting when you add in another truck. Let's say you have a company with a fleet of five trucks, you could be making $10,400,000 before expenses.
If you had a 15,000 DWT tanker (which is a small boat with a capacity of about 4,000,000 gallons) you could have a one cycle profit of...
I'll let you do the math.
Obviously some research into the trade procedures, taxes, liscences, equipment, and transportation issues are required, but the fundamentals are the same.
So, Who is this truck driver?
It's you.
I can't help it, I have to link to this Seth Godin entry. It's called
Why bother having a Resume?
The guy has a great sense of how to work for fun. It's contagious.
It is possible to become 66% smarter by using simple mental simulation techniques.
Brain scans show that when people imagine a flashing light, they activate the visual area of the brain; and when they imagine someone tapping on their skin, they activate the tactile areas. A review of thirty-five studies featuring 3,214 participants showed that mental practice alone - sitting quietly, without moving, and picturing yourself performing a task successfully from start to finish- improves performance significantly. Overall, mental practice alone produced about two thirds of the benefits of actual physical practice.
Think about how much idle time you spend each day. Time spent acting is a fraction of the time we spend waiting for that moment. Instead of just watching TV, imagine what's going to happen next. Instead of merely sitting in the car on the highway, imagine who you are going to talk to that day and what you are going to say to them. The more visualization you do the smarter you get. Some of the best visualizers can predict what people are going to say, what happens at the end of a complicated movie, and yes, solve complex mathematical equations.
Mental simulation is a simple technique that you may already use. Mental simulation is the reason people use bathing or showering as a brainstorming technique. Bathing takes away distractions that keep us from visualizing the future. It's no wonder that Alan Greenspan spends two hours a day soaking in the tub.
Mental simulation improves skills, problem-solving, and emotional management.
Mental simulation can build skills. Mental simulation helped people weld better and throw darts better. Trombonists improved their playing, and competitive figure skaters improved their skating.
Mental simulation helps with problem solving. Even in mundane planning situations, mentally simulating an event helps us think of things that we might otherwise ave neglected. Imagining a trip to the grocery store reminds us that we could drop off the dry cleaning at the store in the same shopping center. Mental simulations help us anticipate appropriate responses to future situations. Picturing a potential argument with our boss, imagining what he will say, may lead us to have the right words available when the time comes (and avoid saying the wrong words). Research has suggested that mental rehearsal can prevent people from relapsing into bad habits such as smoking, excessive drinking, or overeating. A man trying to kick a drinking problem will be better off it he mentally rehearses how he will handle Super Bowl Sunday: How should he respond when someone gets up for beers?
Mental simulations help us manage emotions. There is a standard treatment for phobias of various kinds - spiders, public speaking, airplane travel, and others. Patients are introduced to a relaxation procedure that inhibits anxiety, and then asked to visualize exposure to the thing they fear. The first visualizations start at the beginning of the fear. For example, someone who's afraid of air travel might start by thinking about the drive to the airport. The therapist leads the patient through a series of visualizations that get closer and closer to the heart of the fear ("Now the airplanes' engines are revving up on the runway, sounding louder and louder..."). Each time the visualizations create anxiety, the person pauses for a moment and uses the relaxation technique to restore equilibrium.
Notice that these visualizations focus on the events themselves - the process, rather than the outcomes. No one has ever been cured of a phobia by imagining how happy they'll be when it's gone.
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An Entrepreneur is someone who starts companies, right?
Well, yes. But an Entrepreneur also creates Ideas and Relationships. An Entrepreneur can create things as large as political movements or things as small as road trips. By definition, an entrepreneur creates wealth. Wealth can be defined in many ways.
An Entrepreneur creates Wealth
Wealth = Friendship, Knowledge, Financial Security, Freedom, Love, Intelligence, Achievement, Anything of personal value.
The same basic skills apply to professional entrepreneurship, as they apply to any other type. Three Universal stages apply to wealth creation,
1. The Idea - Ideas often occur organically, a good entrepreneur appreciates problems for the opportunities they provide. Ideas can be simple - like inviting someone to a party, or complicated, like harvesting the motion of waves on the coast to generate energy. Often, in economic entrepreneurship, the person who crates the idea is not the person who starts a company around that idea. Ideas have far reaching consequences that can change the world for the better. Ideas have many forms, like a new joke, or style of golf swing.
2. The Introduction - Ideas can be introduced intentionally or by example. Once an idea is introduced, the responsibility of communicating and acting on that idea is shifted to it's followers. Without followers, an idea is merely a thought. during introduction, the majority of the idea is created in the shortest amount of time. Presenting an idea empathetically, and with confidence will give your movement good character throughout it's life.
3. Growth/Fruition - Some ideas require leadership, some don't. As your ideas become successful, just remember - it is easiest to perpetuate movements that benefit your followers. That can mean making complicated ideas simple, gifting shared moments of humor, or creating communities for people to be a part of. Think in terms of others, and you will be amazed at the changes you can make.
Destruction is a form of creation
- Donnie Darko
My roommate paid me thirty dollars to write a sixteen sentence review on business week magazine. (sleeplessness can be a powerful motivator)
While writing I discovered a few interesting things
1. Internet ads of keywords within articles, hyperlinked to advertisers websites, enjoy a 3-10% average click rate. Banner ads get a dismal .2%.
2. Azureus began using encryption in its code last year, to disguise its file sharing content. This technology could make it impossible for any movie studio or law enforcement agency to know what's moving over the internet. This could make file sharers impervious to lawsuits.
3. With the stated corporate tax at 35% of income, fortune 500 companies paid an average of only 26% in taxes. The top three paid 0.0%, 0.3%, and 0.7%. (Things don't seem to look so bad for your future business)
The Soule Institute, home of the Trunk Printer.
Have you ever needed to print a laptop document between meetings in your car, but didn't want to drive all the way to kinkos for a two dollar printout?
Well here is how to build a trunk printer, (photos and ROI analysis will be posted soon)
Materials:
One printer - mine is a dell printer that came with my laptop
USB and power cords - these should have been included with the printer
Two bungee cords or rope - essential decor in any garage
Car Power Inverter - These are extremely useful for powering everything, Can be purchased at Walmart or online.
Step one - Install printer drivers.
Many modern printers are plug and play, if not, download drivers from the company website. Test your printer in the house, and make sure it works.
Step two - Configure set up
Put the AC adapter under the passenger seat. (it may be the driver's if this is more convenient) Pull the cord from the inside edge of the seat and plug it into the car outlet.
Load the printer in your trunk, next to the back seat - facing the rear. Thread the wires from the trunk, through the crack in the backseat, under the floormat and under the front seat. Most all cars let you fold down the backseat to expand the trunk space, fold the seatback temporarily so that you can route the wires into the cab.
Plug the power cord into the inverter and pull the USB cord up between the seat and the center console. This way it will be available to plug into your laptop for printing.
You will now have a powered printer in the trunk with its power and USB cords conveniently stowed away and ready to connect.
Step three - Securing the printer
Lash down the printer with the bungee cords or rope. There are many cracks, hooks, and protrusions to tie onto.
Step four - Load the printer
Since the printer is next to the backseat, merely folding it down gives you easy access and allows you to stock the printer with paper.
Step five - Test the setup
Plug your laptop into the USB from the drivers seat. Print normally and retrieve your documents out of the trunk.
You now have a mobile office solution for printing up that business plan or flyers in your car, all with items lying around the house. You can also leave a laptop charger plugged in under the seat for charging your notebook. Impress your friends and co-workers with your mobile office and custom documents on the go.
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