“Literature starts by being personal, but the deeper we go inside the more we become everybody’ ― Donald Hall
One of the best ways to share your insights with people is to make it a story that touches them on a personal level. I am very aware that some of what I write below maybe a great oversimplification. However, that is a trade off I chose to make so that the world of business becomes more accessible to everyone. In my humble opinion, the two things we undervalue in life are common sense and empathy. A lot of business rests on these two fundamental principles. It is that simple.
If you want another testimonial, listen to Charlie Munger. Munger, the 95 year old billionaire and Warren Buffet’s partner in business and in life has this to say: “You don’t have a lot of envy. “You don’t have a lot of resentment.“You don’t overspend your income. “You stay cheerful in spite of your troubles. “You deal with reliable people. “And you do what you’re supposed to do.“And all these simple rules work so well to make your life better. And they’re so trite.”
While the world of business is incredibly complex and this complexity is only exaggerated by technology, the core principles of business remain the same. This article tries to distill the world of business in three simple questions any aspiring entrepreneur, student of business or an established businessman can consider while dreaming about, learning about or while running a business.
1. Would I Buy My Own Product?
Don’t be fooled by the simplicity of this question. In fact, most simple questions are also the most profound. Let me explain some of the deeper layers that underlie this simple question.
First, in order to answer this question, you have to consider how does a product change your life. Does it save time? Does it give you pleasure? Does it make you more productive? When you start down this path, you discover what gurus call a ‘value proposition’. A value proposition in simple terms is what value does this product add to your life? It is a question that you should be able to answer in one sentence. For example, in case of Facebook, it allows me to connect to and stay connected with more people. For Twitter, it could be the fact that you can tweet a celebrity directly. For Google, it is the best way to search the internet.
Of course, the basic function is just the beginning. You have to wrap a product in a dream. Even the most mundane can be infused with aspiration if you empathize. That’s where the advertising and marketing comes in. Great advertising is backed by a great product. Otherwise, you are trading snake oil
Second, you want a product that is appealing and good looking. This line of questioning will lead you to user interface (UI), user experience (UX) and design principles. Design makes sure that the product is not just functional, it is also very user friendly and easy to use. Assume that most of your users don’t have a long attention span. Therefore, you want them to understand the functionality very intuitively like a child. A good book on the topic is ‘The Design of Everyday Things’ . The difference between Facebook and other social networks like friendster was a great looking and well functioning website.
Third, you have to ask if someone else is making a better product i.e. your competition. Big data brings diversity to the data set and you can understand more people’s preferences and who is serving those preferences well. Artificial Intelligence (AI) helps you understand more about the unknown unknowns — the questions you never knew you had to ask.
The same question can also be re framed in a service setting. Ask a great Relationship Manager (RM) what his challenges are? He is bound to say I wish I could understand all my clients better. There are many ways to understand clients. It begins by knowing each clients’ name as well as the correct pronunciation of their names. Ask yourself this : ‘would you like to be treated as a nameless widget or would you like your name to be mispronounced?’
The above paragraphs are meant to explain the depth of a very innocuous and simple question. But, it requires an objective, unbiased and introspective mindset to answer that question. Of course, it goes without saying that you should have an ego finer than dust.
2. What Is The Price Society Has To Pay To Keep My Business Running?
There are no free lunches in this world. As per Newton’s third law of physics, every action has an equal and opposite reaction. Whether you think of starting a business, running one or growing an existing one, you have to think of what are you taking away from the outer environment in which a business operates i.e. society.
The design of a product that incorporates recycling or closed looped systems is an added advantage over the long run. When you run a business, society gives you an implicit licence to operate one. Nobody is asking you about the resources you will be depleting. Rather, that is a question you should ask yourself everyday.
The price society has to pay is not just environmental. It also includes the impact of immoral and unethical dimensions of a business. If your business had only one client i.e. you, would you sell yourself a very toxic product?
In all fairness, will you disclose all the ingredients in your product so that clients can take a informed decision? The internet and the information age has given birth to a new breed of educated and enlightened customers. Millennials are increasingly more focused on sustainability and are more environmentally conscious. Besides catering to the future generation, which would likely include our children, it is a fundamental duty to minimize the adverse footprint our business may leave on the society.
3. What If Everything I know And Believed In Is Wrong ?
One of the biggest contributions of Richard Thaler, Nobel Prize winner in Economics for his work on behavioral economics is to prove that humans are just humans. We are not always rational. We have quirks and we operate using rules of thumb. A lot of our decisions are biased and taken in a few seconds without deep contemplation. Therefore, treat common sense as your most valuable asset.
Thalers’ work , along with that of renowned psychologists Daniel Kahneman and Amos Tversky forced the community of economists to rethink their mathematical models by incorporating the quirks of human behavior. As per Wikipedia, this irrational behavior can be classified into three themes:
- Heuristics: Humans make 95% of their decisions using mental shortcuts or rules of thumb.
- Framing: The collection of anecdotes and stereotypes that make up the mental filters individuals rely on to understand and respond to events.
- Market inefficiencies: These include mis-pricing and non-rational decision making.
In other words, people are irrational and luck plays a huge role in how your business pans out. As Mike Tyson famously said “Everybody has a plan until they get punched in the mouth”. The statement alludes to a need for humility. You could have done a ton of research, have very detailed plans and even a successful Kickstarter (crowd sourcing) campaign and yet fail to grow your business. Always, allow for an element of unpredictability especially when it comes to the competition which today can come from anywhere.
To cut a long story short, always have a backup plan. It is not surprising that when most entrepreneurs say they have a risk appetite, they mean they have a side hustle, an earning spouse or enough savings to tide over a failing business for a year.
Universal Truths In Business
What I outlined above is to illustrate that business is at once both complex and simple. There are some fundamental tenets of business that haven’t changed from time immemorial. Businesses that span centuries are testament to these tenets. However, these universal truths are equally applicable to all businesses i.e. startups, mature and growing businesses.
Asking the right questions is a great way to truly convincing yourself of the validity of your own business ideas. Remember, the easiest person to fool is your own self.
Finally, to be very clear — please read the above objectively and without reference to socialism, capitalism or any other system in mind. Just imagine running a business catering to one client and only one client. That client is you.
Then, decide: how will you design such a business?