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Betting on the wind

No project, no brand, no company exists in a vacuum. You make bets about external forces when you build something.

If you want to cross the Atlantic by boat, you can build a sailboat. Your bet is that the wind will be right when it's time to sail. Or you can build a motorboat and deal with the noise and expense, but insulate yourself from the wind.

If you launch a $100 million magazine, you're making a bet that the advertising environment will support you a few years down the road. If you spend four years getting an advanced degree in computer engineering, you're making a bet that there will be plenty of high-paying jobs still waiting for you when you graduate.

If I had a hundred million dollars to invest in a business magazine, there's no way I'd invest a hundred million dollars in a business magazine. Why put all your chips on one medium, one source of revenue, one model?

The external factor is not disconnected from your bet. It is your bet, your decision. Damning the gods of fate because you made the wrong bet makes no sense. I rarely see business plans that have a section entitled, "External forces we're depending on." Acknowledging that things out of your control will change is the first step in hedging your bets in advance, just in case.

Marketing intolerance

Until 1967 (when I was seven) it was against the law for a white man to marry a black woman in Virginia.

Marketing is a complicated beast. It's not just advertising. It's stories that spread, it's editorial content, it even includes interactions and facial expressions. Marketing amplifies human nature. We had no trouble living with racist laws because that racism was confirmed by the media we consumed.

When someone stands up in front of a crowd at a political rally or in a church, they're marketing. And when a Hollywood filmmaker turns someone of a particular race or sexual preference into an object of ridicule or contempt, that's marketing too. Politicians market every time they speak up at a press conference.

When Michal Grzes, an elected representative in Poland stands up and criticizes a zoo for housing a gay elephant, he's doing marketing as well. If you want a cheap laugh, all you need to do is make fun of the minority, treat them as lesser, or separate.

I'm surprised and delighted that online media is being used to market tolerance more than intolerance. But it's an uphill battle, and until we get to the point where homophobia and racism (even for laughs) is unheard of, we have a long way to go. Marketing is too powerful, imho, to be wasted diminishing someone's humanity. And no one ever got ahead (no one, ever) by limiting the equal rights of someone else.

What kind of open are you looking for?

If you hear someone talking about "open source," it's quite possible that this isn't what they mean. One major soft drink company, for example, was talking about turning their brand open source. Pretty unlikely. Do you think that they meant allowing anyone to use their brand in any way they chose on a share and share alike basis? As change swirls around, the terms matter.

Mike sent me a list of different types of open. I amended as below:

  • open source : a program whose source code is made available for use or modification as users or other developers see fit. If a car goes open source, then you're permitting others to copy your engine and body design, improve it, put their improvements back into the pool and share some more.
  • open infrastructure: Amazon's cloud is an example of this. You build the pipes and allow people to rent them to build their own systems on.
  • open architecture: A system (hardware or software) where people can learn how it works and then build things to plug in to extend it. The IBM PC had an open architecture, which meant that people could build sound cards or other devices to plug in (without asking IBM's permission).
  • open standards: relying on rules that are widely used, consensus based, published and maintained by recognized industry standards organizations. It means that you're not in charge, the standards guys are. Bluetooth is an example of attempting this, so is USB.
  • open access: APIs that make it easy for people to get at the data on your platform (twitter is a great example, so is Google maps.)
  • open video: the combination of a p2p platform, open standards, free to share and open canvas.
  • open canvas: when your platform permits users to express themselves. WordPress and Squidoo come to mind.
  • open book: this is a form of management in which all your employees see all the books, thus bridging the gulf between management and labor.
  • open sesame: the best way to get into a cave.
  • open mike: when anyone who shows up can be part of the show.  I guess the difference between this and open canvas is that this is more linear. "Who's next?"
  • open forum: users comment, rate and rank. Digg and Zagat's come to mind. We could probably divide into the approaches that are more social (Chowhound) and those that are less (Yelp).
  • open door: simple method to allow individuals speak truth to power. Getsatisfaction is one example.
  • open engagement: when individuals in power are available to all comers for questions and answers and dialogue.
  • open bar: the alternative to a cash bar. You pay one fee and then get all you want. In a world where selling is more expensive than delivering (things like bandwidth) this makes more and more sense.
  • open borders: your data is portable and you can walk out with it at any time. Amazon has closed borders (your history stays there) but OPML is open borders for RSS.
  • open elections: when anyone can vote, not just the elites, or registered users, or those that pay.
  • open house: allowing prospective buyers to walk around inside your product before deciding to buy.
  • open sauce: a company talks about its business methods publicly to
    build a brand. For example, Fred Wilson talking about how he invests or
    DUI blogger talking about how to beat a breathalyzer. (HT to Alex).
  • open to all: the opposite of a country club. A trade show or meeting or event that doesn't work to screen out attendees.
  • open identity: A protocol for carrying your identity from site to site, at your discretion.
  • open interaction: when previously private conversations (like customer support) are handled in public (via Twitter, for example).
  • open and shut: the kind of answer you rarely get.

Ignore sunk costs

Stationary The most important decision-making rule you learn in business school is still largely misunderstood.

When making a choice between two options, only consider what’s going to happen in the future, not which investments you’ve made in the past. The past investments are over, lost, gone forever. They are irrelevant to the future.

You have two pieces of land. One you bought for $1,000,000, one for $10,000. On which one should you develop a gas station?

I know. The one that’s right next to the huge subdivision being put up, not the one next to the condemned shopping center. Does it matter how much the land cost to buy? No. Not at all.

You have tickets to the Springsteen concert. They were really hard to get. You spent four hours surfing StubHub until you found the perfect seats for $55 each.

On your way into the event, a guy offers you $500 cash for each ticket. Should you sell?

It turns out the amount of time you spent getting the tickets is irrelevant. If you wouldn’t be willing to PAY $500 for these tickets (and you weren’t, or you would have) then you should be willing to sell them for $500. Spend $250 on dinner and go buy better tickets for tomorrow night’s show.

Or say you make a mistake and go to the concert instead of selling (those seats are $500 seats now). But Bruce is sick and Manfred Mann is substituting for him. You don’t like him so much. But you paid $500 for the seats! Should you stay?

[Just because the guy spent a lot on the sign for his store doesn’t mean he shouldn’t spend more to spell the biggest word properly. The amount he already spent is irrelevant. What matters is what the benefit of spelling ‘stationery’ properly will be.]

Ignore sunk costs.

The TED Tribes talk is now live

alas, the links are gone. The web ages ungracefully sometimes.



Do you have customers or members?

If you changed your model to have members instead, what would that look like? If people had to subscribe, or be admitted, or apply… and if you had to please the membership, not convert new strangers.

The web likes businesses that have members.

What to do with people who aren’t going to go away quietly

Stalling provides a hurdle that allows you to filter out requests.

If you put people on hold for six minutes, the trivial calls hang up. If you tell people that they can have something they've requested but will have to wait a long time, the unmotivated will go away. (I'm not proposing that this is a good way to handle customers, I'm merely saying that it does in fact triage the incoming requests.)

The question is, what do you do with the people who, from the start, are obviously not going to go away?

If a woman is in labor, you can try every demotivating tactic you can think of, she's still gonna have a baby. Might as well accept this and get her a room in the maternity ward, right now. Anything else is just annoying and a waste of time.

Don't try to talk a vegan into eating the chicken-fried steak just because the chef will yell at you if you ask for one more plate of steamed vegetables. It's not going to work, might as well skip the discussion and go get the veggies, with a smile.

It takes judgment to figure out who's not going to go away, but once you know, embrace the situation, don't struggle with it. It doesn't matter if it's not fair or not convenient. It is, it's here, it's now, and you win and they win when you accept it.

Two halves of the value fraction

In a down economy, marketers fret a lot about price. We think that since times are tough, people care about price and nothing but price.

Of course, people actually care more about value. They care about value more than they used to because they can’t afford to overpay, they don’t want to make a mistake with their money.

Value = benefit/price. That means that one way to make value go up is to lower price, right?

The thing is, there’s another way to make the value go up. Increase what you give. Increase quality and quantity and the unmeasurable pieces that bring confidence and joy to an interaction.

When all of your competitors are busy increasing value by cutting prices, you can actually increase market share by increasing value and raising benefits.

Too much free

If you want to know who’s a newbie on a film set, just watch what happens at lunch. Major films have huge buffets laid out for cast and crew, and the newcomers can’t resist. It’s FREE! Over time, of course, the old-timers come to the conclusion that it's just lunch, and the crew gets a bit more jaded and learns some self-restraint as well.

The first time a previously expensive good or service is made free, we’re drawn to it precisely because of the freeness. The fifth time or tenth time, not so much.

Free online has two distinct elements, then. Breakthrough free, like the first free ebook or the first free email service, and sample-this free, which decreases the cost of trial and lowers boundaries of the spread of an idea.

But they shouldn’t be confused. As the market for free gets more crowded, we’ll see more and more people promoting their free products, stuff that people used to have pay for. A complete shift from ‘you will pay’ to 'it is free' to  ‘I will pay for ads to alert you it’s free' to ultimately, 'I will pay you to try it'.

Free by itself is no longer enough to guarantee much of anything.

Strangers and friends

Most marketers are organized around more. More share. More customers.

And if you want to do that fast, it means marketing to strangers. Strangers that don't care about you, don't trust you and aren't listening to you.

You market to a friend differently. A friend isn't necessarily someone you went to summer camp with, it's someone who gives you the benefit of the doubt. Someone who will listen, at least once, to your pitch.

I was talking to an author about his next project. The question I asked
him was, "are you writing this for strangers or friends?" The
implications are huge. It impacts how you design the cover, how you
price it, what it's about, where you sell it, when you publish it, how
much you pay for store displays, etc…

You need to treat friends differently at every step along the way. First, don't confuse the moments you're supporting them or connecting with them with the moments when you are doing business. Second, understand that the most powerful win is when your friends tell their friends about you. This is worth 1000 times more than you talking about yourself.

The cool thing is that now, everyone has ten times as many friends as they used to. The social graph online is a fascinating, exponential factor in growing the list of people who might be willing to hear what you have to say (once).

Which means that your site and offer and products can be organized around friend selling instead of stranger setting.

Guaranteed: if you sell a friend the way you sell a stranger, you've made neither a sale or a friend.