American hare, Asian tortoise

I’ve been meaning to get a drink from the cafe within the library for a while. It’s exam period, and all the seats were taken. But I finally got a chance to sit. I got myself a “Peach Dream”, a smoothie with peach flavour I think.

I quickly sat down at one of the tables that a lady graciously shared with me. Her friend soon returned with their drinks. I was just happily sipping my smoothie, watching a man on his laptop, one girl slumped on the table with her books, and listening to a mother reading a book to her daughter.

The two ladies at my table began talking.

“Did you know her son got 58 out of 60?”
“Really?”
“Her son is already so clever. But he’s still getting tuition.”
“But he’s so clever! He might get 50 even without tuition.”
“We don’t know if it’s because he has tuition, that’s why he got 58.”

That was a primary school science test. Hey I’m not eavesdropping. I just happen to overhear their overshared conversation.

Believing you can improve by putting in effort

There’s this study conducted dividing people on their perception on learning and intelligence. One group believed that intelligence is fixed, therefore if they don’t know something, they’re doomed to never learn how to do it properly. The other group believed that intelligence is malleable. If they put effort into learning, eventually they’ll get the hang of it.

The first group didn’t care what the answer was, only whether they’re correct or not. They didn’t care to learn how the answer came about. The second group cared more about why an answer was so.

When the 2 groups were tested again, the researchers found that the second group improved significantly. The first group didn’t do any better or worse.

I’m going to generalise here. Asians typically believe that if you put effort into something, you can improve. Be it maths, science, English, Chinese, whatever. That’s why here in Singapore, parents hire tuition teachers for their children, even if their children have phenomenal grades in school. (Also see PISA).

I didn’t have any tuition teachers after primary four (age 10). Not because I’m smart, but because my dad couldn’t afford it. Good thing I turned out alright…

Another general trait of Asians is that we save. Money that is. We’re brought up with the concept of saving money for a rainy day.

The hare and the tortoise

I read this book by former British Prime Minister Gordon Brown called Beyond the Crash. He brought up some concepts I’ve learnt about the global economy and politics.

America and Europe lead the world in terms of consumption. It’s worked so far because they also produced as much (as in exports). Their production brought in enough money for them to consume. They’ve raced ahead and amassed much wealth.

Like the hare, they’ve grown comfortable and stopped (more or less).

Globalisation allowed the other countries to come to the fore. The BRIC (Brazil, Russia, India, China), Indonesia, Philippines.

American (and European?) jobs flowed to other countries. First the Baby Boomer generation is slowly retiring, leaving a mass number of jobs for the smaller group of Generation X-ers who cannot fill them. Then globalisation killed those jobs, and the current Generation X-ers and Y-ers can’t find jobs.

The subprime housing situation created more turmoil. The recent bank crisis instilled fear and distrust. University tuition fees go up as people sought to get a Master’s degree in the tight job market. (Just for info, I’ve read there’s an “education bubble” going on).

America just averted a $14 trillion debt ceiling problem. Greece has a financial problem. Europe faces a sovereign debt problem. Their aging population doesn’t have enough people to take care of them, financially speaking (where do you think taxes go to?).

And the tortoises started to catch up.

Education

I’ve read an economist praising the education system of Singapore. I must admit, I was surprised. Then he (can’t remember whom or what book I was reading. Sorry…) pointed out that in America, teachers with average graduating scores are dumped to “second-rate” schools without training. In Singapore, the Ministry of Education chooses the best teachers, and provide them with training. I think it was 2 out of 10 applicants who get in. The Singapore government takes education very seriously.

Barack Obama has stated he’s taking America’s education seriously. As far as the future is concerned, I believe maths and science to be crucial. We’re going to need engineers, mathematicians, doctors, physicists, chemists, biologists and more to tackle the health care of our aging population, creating a sustainable Earth, and understand and make use of any future technologies.

Global commerce

Here’s something you should know. To get money, you have to sell something in exchange. I don’t care if it’s an apple, an iPad, television shows, movies, your body, real estate, knowledge (information). Even if it’s just a 250 by 250 pixel ad on your web page. You have to sell something.

America and Europe produced enough for domestic and international consumption. As a result, they grew. Then globalisation came. Their production dropped (because that production went to other countries as jobs). You produce less, but your consumption rate remain. You should see the problem, right? Then their domestic consumption even increased (think rampant credit card use).

Here’s the catch. China (seems to be the biggest blamee, though there are others) is exporting more stuff, and America (and Europe?) is buying. China buys up raw materials from other countries, manufactures products, and sells them.

What you should realise is that China has a small domestic consumption (remember Asians extol saving as a virtue, so we buy and consume less). Contrast that with China’s growing export business, you should see how China is growing in strength. But this depends on other countries buying their stuff *cough America cough*. China’s growth comes mainly from exports and China’s biggest worry is that people stop buying their exports.

The rebalancing

There was a time when the outsourcing/offshoring thing was a craze. Do you know how supply and demand works? As jobs went to India, China and Philippines because it’s cheaper, those jobs started becoming more expensive as the workers wanted better pay. It might still be cheaper to outsource/offshore, but it doesn’t always make a big financial impact to the bottom line.

You know this oil thing we need? It’s getting more expensive as it becomes scarcer. We need to find alternative energy solutions soon. See education above. Where are the people we need to solve this problem? (They aren’t motivated enough to learn, and they’re watching cat videos on YouTube).

You know what more expensive energy means? Transportation is going to get costlier. Getting a product to be manufactured in China, then assembled in Mexico, then shipped to America is going to be financially inadvisable.

You know what that means? Jobs are going to start flowing back (to wherever they came from).

You know what? There are millions of jobless young people who are willing to do those jobs.

But you need to be willing to train them. Specialisation cannot be your focus. Remember, these people just graduated from school. You won’t find a person who fits the job of a managerial post with an emphasis on information technology.

Get that graduate (who has a bundle of joyful energy) with the MBA. Train him/her on your business with information technology.

Get that programmer who did a bunch of software projects. Teach him/her about your special accounting software business.

Export more bits than atoms

I read that a Singapore minister (can’t remember who. You should know by now I have a terrible memory for these things…) who said that Singapore’s economic concern should still be to focus on manufacturing. I believe he’s referring to material goods.

I’m going to ask you a question. With the climate concern now, and that our landfills are starting to fill with our waste at a rate that’s slightly alarming, and that raw materials are getting costlier to shovel around, should you still export physical goods?

That’s still going to be a viable business. I mean, I still see people queuing up to buy the latest iPhone 4S, and texting on their perfectly working iPhone 4 (I still use an iPhone 3G, which Apple doesn’t even support anymore).

Remember the outsourcing/offshoring thing? There were 2 kinds of jobs: the physical creation of a product, and the intangible stuff. China does manufacturing. India does call centres.

As people become more aware of what they buy and consume, I see people having less material goods. The modern cell phone allows you to play games, organise your calendar, keep todo lists, take photos, capture videos, record audios, browse the Internet and make phone calls.

Even if that’s not the case, there’s a physical limit to how much you can export (and thus sell and thus make money). So sell your skills and knowledge. Teach people stuff. Offer something that’s not so easily replaceable by another person in another country.

Africa poised as untapped and trapped consumer base

Africa is like the poster child for a country in poverty. She has a large population but most of her people are struggling with where the next meal is coming from.

As China and India got more of their people out of poverty (due to globalisation in part), their people started buying stuff.

India is an interesting case. As her economy improved, so did her domestic consumption. In a sense, India is more “stable” than China in terms of growth.

The point is that Africa has a large population who most probably cannot and will not buy your products and services. They’re too busy dealing with AIDS, malaria and hunger. Not only that, it represents a huge number of people who cannot contribute to the world.

A human mind is a terrible thing to waste.

Finishing line

That was a lot to write.

So in case you skipped the whole shebang above, here’s the moral: Consume less (with more intelligence), raise education, and help other people.

Online business mentorship

In case you missed it, I’m offering to help you with starting your own small online business. You don’t have to pay for it, at least not with money.

Basically, you help me write a few articles, or in whatever form of contribution you can give (I’m flexible). And in return, I help you to get your own online business off the ground. You don’t have to pay me anything, and I don’t give you financial assistance.

And whatever profits your business generates, you get to keep it. All of it. I don’t get a single cent.

In terms of financial reward, that’s a terrible deal for me. Why the hashbrown would I do it? Because I want people to feel more in control of their lives, particularly in these rough economic times. Because I want to create more entrepreneurs and self-starters. A small online business on the side can generate enough cash flow to help with monthly food and/or bills. That’s immensely helpful.

Because my time is limited, I cannot help too many people. So the maximum will be 3. I’ve already had one person interested. If you’re interested in working with me, contact me.

Offering you a business mentorship opportunity

Times are hard. Students are treading water in a deep pool of student loan debt. The unemployment rate is high. Those without jobs wonder how they’re going to feed themselves. Those with jobs wonder if they can keep their jobs.

While the financial markets have caused much trouble, occupying some prominent financial street isn’t enough. Protesting only means you’re surrendering the solution of the problem to someone else, waiting for that someone who may or may not be able to help you.

It is said that total sum of all small businesses drive the majority of all businesses in the world. I’m offering to teach you how to start a small (online) business of your own. I run a small business, and though it has a modest return, it feeds me. And in my book, that’s successful enough for me.

Here’s the deal

I’m not providing financial aid to you. But I will answer any question you have on starting your online business. If you have an idea on what you want, we can work on that. If not, we can work to find something you’d be interested in. I will point out reference material you can read up on. I will suggest actions for you to take. But I won’t do those things for you. You still have to work for it.

In exchange, you have to write articles and do some research stuff for me. 1 article per week, either for the blog, or for my magazine, or for my email newsletters. Add in the research, you’re probably looking at 2 to 6 hours per week, depending on how fast you write/research. If you’re currently studying, that shouldn’t put too much of a dent into your week. If you’re still employed, I can help you with a side business that brings in a little bit of cash per month. If you’re unemployed, well, the time taken shouldn’t bother you too much.

I’m also open to other types of contributions. Maybe you can create and edit videos. Maybe you’re awesome at taking photographs and photojournalism. Suggest away, and we can balance out the stuff I might ask you to do.

As for that business of yours, I won’t take a single cent. All profits from your business will be yours. You did all the work, right?

The time frame is 2 months. For now. We can extend if it works out. Most people will be winding down for the end of the year. You, on the other hand, can learn and create something that puts you in a better position for next year.

You think 2 months isn’t long enough? I created a profitable business selling a programming guide within 6 weeks. It took that long because I was writing code and creating a PDF that explains all that code. You can probably create something that you can sell profitably (even if modest) within a month.

If you don’t want to work, then even a year isn’t enough.

Also, I’m not going to teach you how to create the next Facebook/Twitter/Whatever. I’m here to teach you how to build a profitable business (as opposed to business for equity), and not something that’s valued at 3.7 million dollars after 3 years. I don’t have 3 years. I need to eat right now. I’m assuming you share similar feelings.

“Why are you doing this?”

I want to help you. If I was still studying for my bachelor’s degree, I’d at least be interested in someone offering to teach me how to start a small business. It would help with paying off my student loan, and I would have started before I graduated (when the student loan interest starts to kick in and I had to start paying back). If I was out in the world, whether employed or unemployed, a couple of hundred dollars per month would help. I grew up in a family between poor and middle-class. Every single dollar helps.

There are probably a lot of stuff I should clarify, but I don’t know how many people will respond to this. I might be helping 1 or 2 people. At the most 3. There might be no one who’s interested. That’s fine too. But if you’re interested, contact me and we can work out the details.

Negative sales targets and percentage commissions

A while ago, I received an email from a distraught salesman. He believed his sales commissions were wrongly calculated, and asked me to shed some light.

Note that I’m not using the exact numbers he gave in his email.

The story goes that Michael (as I’ll call him) and his colleagues were given sales targets that were negative. How could sales targets be negative? Shouldn’t you be trying to sell something? The reason given was that the current economy was disastrous, and basically each sales person was trying to not lose sales.

You’re gonna bleed. It’s how much you bled.

Anyway, given Michael’s negative sales target, he managed to exceed it. He didn’t manage to bring in sales (positive sales numbers), but he didn’t lose too much money (slight negative sales numbers). But his sales commissions didn’t reflect that.

Now I’m not going to discuss how that works out. I can’t presume to understand the business logic behind the sales commission in this case, but I’ll discuss the mathematics behind the numbers.

The normal sales targets and commission

Let’s say your sales target for this month is $1000. This means you’re expected to sell about $1000 worth of products or services. We’ll ignore the condition that you will get some commission based on what you sell, regardless of how much you sold (my brother’s a sales person), as well as other types of commissions.

Let’s say the sales commission is based on how much extra you sold beyond your sales target. Makes sense, right? Let’s use simple percentages.

If you sold $1100 worth of products or services, then your percentage commission might be calculated as follows:
(Difference between Your Sales and Your Sales Target) / (Your Sales Target)

Or ($1100 – $1000) / ($1000) = 10% commission.

This is assuming that your sales amount exceeded the sales target, of course.

The case of negative sales targets

Now if the sales target is negative, as in Michael’s case, the mathematical formula still applies. But you have to note the negative sign. For some reason, “business” people (no offense to business people) tend to see -4567 as larger than 12, even though 12 > -4567. They see the magnitude first, not the value itself. (It’s also why I get emails about calculations involving negative numbers… anyway…)

Let’s say the sales target is -$1000. Everyone’s expected to lose money, but you try not to lose more than $1000. At least that’s what I’m interpreting it as.

Let’s say Michael managed to lose only $50. Or -$50 to be clear. The formula
(Difference between Your Sales and Your Sales Target) / (Your Sales Target)

have to be modified to this
(Difference between Your Sales and Your Sales Target) / (Magnitude of Your Sales Target)

In maths and programming terms, the “magnitude” part refers to the absolute function. Meaning you ignore any negative signs. Actually, the modified version works for the normal case too (which is why you should use it for the normal version anyway to take care of weird cases like this but I digress…).

So, we get (-$50 – [-$1000]) / abs(-$1000) = $950 / $1000
= 95%

Actually, you should use this:
abs( [Your Sales] – [Your Sales Target] ) / abs(Your Sales Target)

That’s the “foolproof” version. Consider it a bonus for reading this far. Frankly speaking, any competent programmer should be able to come up with that formula, even without much maths background. You just need to think about the situation a little carefully (ask “what if?” more often).

Michael’s calculated commission

When Michael wrote to me, he said his commission was calculated as follows (given that he only lost $50):
-$50 / -$1000 = 5%

Let’s say someone else lost -$900 that month. With the above calculation, that person gets:
-$900 / -$1000 = 90%

Clearly it makes more sense to lose more money! This was why Michael wrote to me.

I don’t propose the method I gave is correct, business-logic-wise. Michael didn’t give me any details on what he’s selling, or what his company is (or even why it’s acceptable to have negative sales targets, regardless of the economy). So I cannot give any help other than from a pure mathematical point of view. But I hope it’ll at least give Michael a fairer commission amount.

Questions

Given Michael’s situation, what do you think is an appropriate calculation formula?

Can you think of (or know of) a realistic situation where a negative sales target is acceptable? I say “acceptable”, but seriously, no company should “accept” that they lose money every month.

Start business or get a degree?

Ok, I’m biased in this. I would suggest you start a business. But I would come off as fake, since I do have a university degree.

In these tough economic times, the value of a university (or college) degree is highly debated. Some people say you don’t need a degree (here and here). And there are also articles and studies saying a degree is (still) the best investment you can make (for example, here and here). [For the latter article, I would add that you be careful of the word “average” being thrown around. Because you read my blog, I would suggest that you’re more than just average.]

DISCLAIMER: The Singapore education system might be different from the system you have in your country. I can’t even tell you if the Singapore system as of writing now is the same as what I went through.

Should I buy the steel sword now or later?

In the role-playing video games I’ve played when I was younger, I would arrive in a town and I’d be immediately broke. I’d go buy the best armour and weapons money can buy. Inevitably, the game designers made it such that it’s highly unlikely you would have enough money to buy every single piece of best armour and weapons for your character(s).

Now you have a decision to make.

“I don’t have enough money. Should I buy that bronze sword now so I can continue with the adventure? Or just tough it out until I reach the next town, where I can buy the steel sword for just a little bit more money?”

That degree you’re thinking of getting is that adamantium sword. And it’s available for purchase about, oh, 8 towns later. You better tough it out…

A degree is traditionally considered the be-all-end-all. Once you have it, you’re set for life. It’ll open doors for you in the corporate world. People judge you (highly?) based on a piece of paper that you have. Job recruiters screen you based on the type of degree you have, looking for computer science degree graduates even though someone with a bachelor of science (majoring in applied mathematics and computational science) is just as qualified *cough*.

There is always another sword better than whatever you have (even adamantium). It doesn’t happen in games because they’re finite. But in real life, there’s always something better you can have. Maybe a professional certificate in something. Certifications by Microsoft, Oracle or any company/organisation that’s respected.

Don’t waste your freedom

Through my primary school, secondary school and junior college days, I had to wake up early and be at school by 7:30am. School ends sometime in the afternoon, where I might have extra curricular activities.

When I was drafted into the military, I was told when I had to wake up. I was told when and what to do in my waking hours. And I was told when to go to bed.

When I started at a job, I had to be in the office at 8:30am. I could only go for lunch between 12 noon and 2pm, and only for 1 hour. I could only go home after 6pm.

I only had freedom of time when I was in the university (and now, when I’m working for myself). When I was in university, I typically took about 20 credits per semester (about 5 classes), which was about 20+ hours of lectures and tutorial work. The class timings were still fixed, but for the first time in my educational life, I had some degree (no pun intended) of freedom. I could choose which tutorial classes I wanted to attend. I could plan my time each week and even each day.

So if you’re looking for advice, I suggest this: Go to university/college and get your degree if you can (keeping the cost of time and money in mind). But start a business while you’re there.

Don’t give me that cranberry about not having enough time. Even if you stretch it, lectures and tutorials only consume up to 30 hours per week of your time. You still have 10 hours more per week than if you’re working full time! Make use of that.

Don’t drink (alcohol). Don’t do drugs. Don’t party (too much). Don’t smoke.

I get that this period of time might be liberating to you, but it’s also the time where your self-discipline is most tested. I’m not saying you can’t have fun. But if you can’t hold yourself accountable now, your future work at a job is going to suck cannonballs.

You have a huge university debt the moment you start. Don’t wait 4 years before struggling to find a job that pays enough that you can repay that.

If the statistics are true, most small businesses fail within 5 years. You have 4 years in university. Start failing then.

You can either start your own business and have some control over your future. Or you can work at a company where the company controls your future.

If you’re reading this, I assume you’re either a mathematician, a scientist or a programmer. Start a business. Get a degree. You’ll probably do fine either way. Even better, start a business while you’re getting your degree.

My first product sucked like a black hole

You’d think after 3 years of studying Internet marketing, learning e-commerce stuff such as web hosting, payment gateways, shopping carts, email autoresponders and the like, as well as reading tons of books on business, marketing, leadership, finance, and other entrepreneurial-related topics, that my first commercial online product would have succeeded beyond my wildest dreams.

It sucked. Big time.

I was also writing on this blog, biding my time if you will. I couldn’t think of a product I’d be proud to create and sell. I’ve bought some seriously sleazy Internet marketing products, and I don’t want mine to be like that. I know how to set up an online business, at least a simple one. I just needed a product to sell. As a Chinese saying goes (paraphrased from the Three Kingdoms):

10,000 things are ready. Just lack the East Wind.

The background of that saying was that preparations for a fire attack on a flotilla of enemy boats were done. Arrows were dipped in tar (or naptha or whatever fire accelerant used in the old days). The troops were massed. Instructions were passed down. Everything was ready. They just lacked the wind blowing from the east. The good guys were on the east side, so the wind would basically blow any fire towards the enemy side.

Where was I? Yes, my black hole product.

A Dungeons & Dragons character class

So I found some people who played Dungeons & Dragons. The way I play a pencil-and-paper (-ish) fantasy RPG with dice rolling, is to use my imagination. I pictured myself as a fire-wielding wizard, or sword-skilled knight, or raging barbarian.

Alas, I happened upon friends who played Dungeons & Dragons as a game of mathematical and statistical probabilities. You might think that’s funny, considering I’m a mathematician. I read fiction and play RPGs (role-playing games, see?) because they allow me to be someone I normally can’t in real life. They allow me to do stuff that can and usually defy the “real world” rules. Why would I want to reduce that to an analysis of statistical probabilities?

It turns out that a substantial group of players (not just for Dungeons & Dragons) prefer to play it that way. Why do you think there are so many multiplayer online games? Because computers can do statistical probabilities and calculations exceptionally well. They just can’t come up with unique storylines. That comes from humans.

And so, I got this idea, “Maybe I’ll create a character class for Dungeons & Dragons. But I want it to be more dramatic-focused, igniting flights of fantasy, with openings for awesome storytelling. Hey since I’m a mathematician, let’s make it unique by making it maths-based.”

And so I created Math Wizard.

The original idea was Math Sorcerer. The difference is a game mechanic of Dungeons & Dragons. Suffice to say, a wizard requires an implement (such as a magic wand) and can do spell rituals (performing magnificent feats but requiring preparation materials and time). I wanted a sorcerer because that class is more chaotic, as in “unpredictable”. I wanted to introduce chaos theory somehow into the magic spells or powers.

A friend, who’s been playing D&D for years, suggested I use the wizard instead. So I had to make a significant change to how I created the character class. At this point, you’re probably already bored by the gaming references, so I’m going to speed over this part.

Financial fiasco

If you didn’t know, RPG products tend to have amazing artwork. Players are predominantly male, and men are impressed most by visual cues.

So my first mistake was to hire an expensive graphics artist for the cover of my ebook product. That cost me over US$ 1000. I’m not sure if I can divulge the exact fee, so let’s leave it at that. Not only did it cost that much, part of the contract agreement was that I could only use that image for only 3 years. After that, I have to renew the license if I want to continue using the artwork. The artist only granted me World First Rights, meaning I’m the only one with the image in the world for the first 3 years. After that, she’s free to sell the image on her own site.

I read a boatload of information on copyright during that time.

Next, I got myself a new website. To do soft marketing, I decided to go with blogging. The idea was to write about the playing scenarios that I played with my friends. This will help with search engine optimisation (SEO) and promotional efforts and stuff.

I also hired a website/blog designer for US$ 850. You know, to give a suitably fantasy-feel to the blog, and to launch with my product. Oh Ego, thou art strong and irritating…

To help with my research, I also bought lots of game books related to D&D. Companion books to the core rule books, books with lists of weapons and accessories, books of related character classes (so I could model my character powers on them without undue imbalance of game play). I didn’t calculate it exactly, but I believe I bought a total of about US$ 200 worth of books.

The books weren’t just for my research. I bought them because I wanted to be a better gamemaster. Interesting quote from Wikipedia:

It was noted, in 1997, that those who favor their left-brain such as skilled code writers usually do not make it in the ethereal gamemaster world of storytelling and verse.

Nobody really wants to be the gamemaster and my friends actually welcomed the fact that I was open to be one for them. It turned out, my friends were divided on my gamemastering techniques. Half of them were happy they got practically unlimited freedom to express their inner character in my make-belief worlds. The other half couldn’t give a shiitake (one of them didn’t even make an effort to participate). Now I have US$ 200 of books I don’t want anymore. That is a lot of business books and fiction books I could’ve bought…

Audience apathy

The real mistake was that I didn’t understand my audience. Frankly speaking, most of those players do not want a story-centric character. Let alone one that has powers based on maths, with possibly complicated game mechanics.

The veteran players might have found my character class insufficiently powerful for them. “Too much fluff.” “Fluff” is the word used for anything story-based or description-based. It even sounds derogatory.

The amateur players might have found my character class too complicated. They can barely wrap their heads around rolling a die, figuring out whether they hit, and how to calculate the damage.

Few people cared that my character class has powers that are awesome when used in the infinite descriptive power of an imaginative mind. If a movie was made around my character class, it would have special effects and situations that made the powers look totally awesome. Have you ever noticed that the bad guys in movies never need to take a ton of hits the moment the hero(es) figure out the bad guys’ weaknesses? That’s because repetitive pummeling is boring. Those bad guys were basically defeated by awesomeness.

But, imaginative storytelling isn’t big with my role-playing gaming audience. They mostly just want to rack up damage. Who cares about hidden levers behind bookcases? Who cares if in the room, there are barrels and baskets, spikes and pikes, chandeliers and champagne glasses? Who cares if you can sling a fireball hanging upside down on a rope ladder? (“Would being upside down disadvantage me?” WHO CARES! IT LOOKS AWESOME!)

Point at enemy. Plan best statistically powerful skill to use. Pummel.

Pricing predicament

I priced the Math Wizard at US$ 7 (now $5 I think. I didn’t care to even check… *sigh*).

Here’s something you should know. Pricing sets expectations. Price is not the only thing a customer considers. And if you’re playing with only price as your competitive advantage, you’re screwed.

The Apple App Store has applications at $0.99. You can’t afford to go there, because you don’t have volume. And if you do have volume, what the hashbrown are you doing pricing so low? Create something worth much more!

The general pricing of RPG products tend to go from US$ 1 to US$ 50 (or even US$ 100), but the typical range is US$ 7 to US$ 20.

This was another mistake. My friends are content to sell products at $1 or $2. They still have day jobs, and they’re taking this as a hobby. I’m running a business. I can’t go that low. Even at $7, I would still need a lot of customers to have enough to eat.

And my target audience just didn’t want to pay my price for what I’m offering. They don’t want my product! This is the most fatal mistake I made.

Quitting and committing

It was around this period of time that I quit my job. Now I have no illusions that this RPG product of mine would rocket me into millionaire status. I quit because I wasn’t happy, I wasn’t growing (professionally, technically, career-ly) and I was eating lunch alone.

But my RPG product was to start off my online business, my foray into Internet marketing and basically where my actions and efforts have a direct impact on my ability to create wealth. So I committed myself to work at this.

So what’s the total damage? My first product cost me over US$ 2000, 2 months in writing the ebook, a few days in reading up copyright laws and regulations, a couple of weeks researching my gaming materials, months maintaining an RPG blog that I no longer have interest in maintaining.

I don’t think I made more than US$ 50 in sales.

And in early 2013, my right to use the beautifully created (and dearly priced) ebook cover image will expire. I don’t intend to renew it.

I learnt a bunch of stuff learning to manage an online business. I just didn’t earn enough to cover costs. Luckily I created another product. Luckily, that one didn’t suck like a black hole.

“Startup founder” is not a career promotion for programmers

It’s a completely different career ladder.

In his book, “The E-Myth”, Michael Gerber identified 3 personas: the Technician, the Manager, and the Entrepreneur. Face it, you’re a Technician. And Michael identified a singularly fatal assumption:

If you understand the technical work of a business, you understand a business that does that technical work.

And that assumption is wrong. The technical side of a business is separate from the business itself.

And with many a technological startup that’s been popping up all over the place, and succeeding, it can be alluring to a programmer (I’m talking to you) to think that he can do the same.

And you can. But you must go into this knowing you’re running a business. Writing your killer web application may be fun, but it’s not your whole business.

Michael Gerber identified the Technician with bakers, chefs, hair stylists and other crafts people. People who do stuff. A subset of them are programmers. Our work, existing as software, can change within minutes (even seconds) of us changing source code and pushing the results out into the world.

A business can change almost as fast. But it’s a system that surrounds the software system. You need to know about the other parts that keep the business going.

Of the successful startups reported in big media blogs, there are also many more that failed into obscurity. Some of them created by single programmers. Maybe you.

Going the whole 9 yards with a startup can be your dream. Raising venture capital. Talking with VCs. Getting angels to invest in you. Raising funds in rounds 1 and 2 (or A and B or whatever they’re known as). Getting media blogs to notice you. Hiring code ninjas (just a thought: bad idea. Don’t hire if you can. And you don’t really need ninjas). Millions of users. Millions of dollars as an exit strategy. A life of cranking out code with [insert favourite brand of soda] and late nights.

Success or failure. From what I understand, a startup can go either way. There’s some control, but there’s still a fair amount of volatility. For all I know, a butterfly flapping its wings here in Singapore devastated a startup in Silicon Valley.

What you need is to understand at least the fundamentals of a business. The fastest way to learn is to start a business yourself. But you don’t have to start it with your precious web application. Your first business attempt is probably going to suck in an epic nuclear explosion. Don’t make it your precious web application.

I’m writing a guide to teach programmers how to start a small online business. It shouldn’t take you more than a month to start, and it shouldn’t take you more than a couple of hours a week to maintain it. This is what Tim Ferriss calls a “muse”. If you’re not too picky, my calculations put your total investment to be no more than US$ 200. And that pays for at least a year (mostly web hosting costs).

The fun part is that the knowledge you gain from running your own small online business, is that most of it can be scaled to larger businesses. Maybe that startup you’re thinking of.

The business guide will be ready in a couple more weeks. Maybe sooner. This is a heads up in case you’re interested. If you have questions, just contact me.

Success and failure business stories

I think people sometimes attach too much emotional importance to successes and failures, even with other people’s successes and failures. “I don’t want to hear about failure stories.” With the implicit suggestion that hearing about failures somehow attract failures into their lives. While true to some point, I feel for the most part, it borders on something called superstition.

So Andrew Warner of Mixergy started a series on interviewing founders and entrepreneurs about their failures. He already interviewed James Altucher and Scott Gerber. Andrew said his audience seemed to avoid or hate these types of interviews.

I don’t really have a distinct separate line dividing success and failure business stories. They’re just stories. “This happened, then that happened, then I learned something, then something failed epicly, then I learned something more, then something awesome happened, then I learned something…”

While there are general themes and lessons to be learned from success stories, there are also general themes and lessons to be learned (and mistakes to be avoided) from failure stories. I don’t propose that you will fail like those people in those interviews and stories. But there’s one important point that most people seem to forget.

You will never succeed in exactly the same way as those successful people either.

You read the success story of how Google became Google. You learn how Facebook started and became the social media giant it is now. You read a book on how Starbucks revolutionised the way coffee (a commodity) is consumed by people, and made it an experience.

When people say “that company will be the next Google”, they don’t mean literally that company will become the next Google. Because nobody else can be Google except Google. They mean that company having a similar success like Google.

And you will never have that particular success, because you will never have the kind of audience, products, problems, opportunities, founders at that particular point in time. That time has gone.

A failure story is more enlightening when it’s followed with a success story. An entrepreneur failed abysmally in one venture, and was left with practically nothing. Then he picked himself up and succeeded with another venture after that. What motivated him, drove him, gave him hope that he could still continue and succeed? That’s the real lesson.

From listening to the interviews of Y Combinator co-founders Paul Graham and Jessica Livingston, there are 3 qualities a startup’s founders have:

  • They’re smart
  • They’re determined
  • They can communicate with each other

From the way Y Combinator decide whether they should fund a startup, determination of the founders is the hardest quality to determine. How do you know if someone would be able to bounce back after a failure in just 10 minutes of a screening interview?

An entrepreneur with a failure-then-success story has shown that he’s capable of bouncing back. An entrepreneur with a success story just have a success. The latter can certainly still have worked hard for his success. I just respect the former more.

And I bring us back to unique successes because of the unique set of conditions of audience, products, problems and opportunities available to an entrepreneur or startup founders. I can’t remember where I heard this, nor the exact quote, but Bill Gates was giving a talk at a college. A student asked him what to do when starting a business or startup. Bill Gates said,

Oh for goodness sakes, don’t do what I did. That money’s already made by me.

Anatomy of a sleazy information product

I think I’ve recovered sufficiently from my ordeal, with sufficient time having passed, that I can talk about it to you now. Back in November 2009 (judging from the file timestamps), I bought an information product. Not just any information product. It’s one of those “how to make money online” products.

SSHHHH!! I hear something… that’s the flapping sound of the spambot vultures! Uh, uh… RAINBOWS! CUTE BABIES! UNICORNS!

Ok, I think I fooled those search engines… for now…

Pitchathon seminars

Where were we? Yes, the uh, information product. I was studying how to uh, let’s use “create online business”. So I got to know this one fellow when I attended a 4-day seminar on Internet businesses. There was another 2-day seminar before that, so it’s 6-days back-to-back. The seminars were like pitchathon fests, where the speakers presented for about an hour, and then at the end, gave a sales pitch. Tens of thousands of dollars changed hands (or at least bank accounts) that day.

I’m not so befuddled by greed and desperation that I fell into their sales funnel, but I can understand the power those speakers held over a willing audience. … Actually, I bought over $400 (Singapore dollars) worth of several CDs, which didn’t turn out to be video presentations but audio ones. “I can’t see that board you mentioned because it’s an audio track!” *sigh* I also got suckered…

Anyway, back to that fellow. I came home and researched on him. And I found he offered a USD 27 dollar product to uh, create an income online. I thought about it hard, calmed myself, and decided to get it. I won’t name the guy nor the product. But a little birdie might just tell you that the product name consisted of the words “autopilot” and “profits”. Just saying.

AAHHHH flapping! Uh, UNICORNS! EXPECTO PATRONUM! *whew*

But I had rules. I would learn what his sales page looked like (so I knew why people bought, and how I wouldn’t get suckered by other such products). I would learn what his sales funnel looked like, because the only way you could learn what that was, was by actually buying a product (so you could go through the entire funnel). I would learn what product he created, and how he created it and so on.

Just so you know, if you see the current date on the page or a count-down timer to when the discount will disappear, the product is highly likely to be sleazy. It’s done with JavaScript, and its purpose is to keep the page looking current so people feel it’s “up to date” and lowers their guard. The count-down timer is to urge people to make a decision fast. “It will be gone by tomorrow!” Humans don’t usually make good decisions on the spot. Come a week later, and you might see that count-down timer still there.

I had a job back then, and so I thought $27 was a cheap enough lesson, even though in my heart, I knew it was a sleazy (enough) information product. Why did I still buy from him then? Because he was a top affiliate marketer (or at least recognised by the other people as so), so he must have done something to get there. I wanted to learn what (morally and ethical) bits of knowledge there was, and how to avoid the sleazy sides of the, uh, let’s call it “industry”.

Sales funnel and affiliate marketing

So some quick definitions. A sales funnel basically comprise of leads/prospects getting to know you, then moving on to a low-priced product, then moving ever deeper into higher-priced products of yours. The conventional definition is strangers getting to know you, then you market to them, building a relationship, and so on until they decide to buy from you, where the funnel closes.

Well, in online marketing, that’s too slow. Their sales funnel encompasses a larger view, that of loyal customers buying (hopefully) higher value (and higher-priced) products and services from you. This is itself, not sleazy. I just want you to know what a sales funnel mean.

As for an affiliate marketer, basically it means someone who sells affiliate products. What kind of affiliate products? You know those Amazon links, where if you click on them and eventually buy that product from Amazon, Amazon will pay the person who provided that link a commission? That’s affiliate marketing. Basically you’re paid a commission for selling other people’s products.

What? You didn’t know that Amazon links are like that? Man do you have a lot to learn… Do you know Google earns money primarily from advertising? “I didn’t know that!” You, my friend, really have a lot to learn…

Amazon’s commission rates are paltry. You think “up to 15%” is a lot? The common commission rate in online marketing circles is by default 50%, sometimes going even to 80% or even 100%. How would anyone earn anything if they give out 100% commission? They have an excellent backend process. They get armies of affiliates (because it’s 100% commission!) and they sell higher-priced items to the customers they eventually get. If you’re interested, you can contact me or leave a comment so I know there’s interest in letting the (tech?) community know more about this particular aspect of the (online) business world.

A $27 business lesson

So, about that $27 information product. Sales page was riddled with big, bold, or highlighted text (sometimes all 3). The headings were meant to lead the reader to excitement and eventually buying the product. The conventional wisdom then was to add so many bonuses that, and I quote, “It would be stupid not to buy” (the quote’s not from this guy by the way). I won’t go into that here because frankly I can’t remember it all, and also because any online marketer doing that now will probably have a hard time (peers and the desensitisation of the audience). Why would anyone still put up with ugly pages and sleazy products? Well, there’s the Nigerian scam. There will always be ignorant people out there.

The product consisted of a PDF file, 8 videos, and a bonus PDF (teaching you about Google AdWords). The videos were Flash videos (.swf), with an HTML file embedding them. They were created with Camtasia, a screen capture software. They were also not created by that online marketer. How do I know? Because the person speaking in those videos was a Caucasian male. That online marketer was a Singaporean Chinese. So don’t give me that calamari about how Americans have shady Internet marketers. Singapore has her fair share too.

Anyway, based on that, I believe he didn’t even create the PDF nor even the whole product. He probably dictated the content, and outsourced that content to be converted into a PDF transcript. He also got the videos outsourced. I’ve heard him speak before, and he’s not fluent in speaking English. Getting a Caucasian to voice the videos solved his speaking problem, and also that a Caucasian voice might make customers feel at ease (I believe many of the customers were American, or at least Caucasian).

During that seminar I attended, he invited his wife on stage. One of the memorable things I heard her say was “I everyday walk here walk there”. In broken Singlish, it means that she doesn’t have anything pressing to do, because her husband is raking in money. The audience, comprising mainly of Singaporeans, took to that with gusto. It was probably why that guy was voted the best speaker, even though I felt there were other speakers who did better.

So how did he rake in money based on just a $27 product? Well, it’s safe to assume that’s not his only product, and his other products might be priced higher. But still, you can make quite a sum from just a $27 product. Remember, he’s an affiliate marketer. “But isn’t this his own product?” Yes, it is. He sold other people’s products within his own product.

I want you to absorb that last sentence for a while.

How an affiliate product works

Let me give you a gist of what that product was about. To be fair, it did contain useful information, to me at that point in time at least. So what it will teach you was to find a profitable niche, satisfy that niche with your product, how to market your product, and how to automate it. And the product did all that. Peppered within the PDF file, were affiliate links to other products. The assumption is that, since the reader has bought this product, the reader “trusts” the information within, and is more likely to trust the information that those links lead to.

If those links lead to $47 dollar products, or $99 per month subscription sites, that’s not really a problem, right? Imagine say 50% commission on all these affiliate links…

Well, the product taught you how to find profitable niches, create products, market your products and product automation. But how do you go about creating that product of yours? Ah, here’s where I felt really disgusted. The author had hinted within the PDF product that he would show you a profitable niche with a hungry audience and how to easily satisfy that niche.

Near the end of the PDF, he said one of the hungriest audience is the “make money online” crowd. AAAHHHH wings flapping! CUDDLY KITTENS! FAIRY LIGHTS! PETRIFICUS TOTALUS!

*whew* And where do you get your product? Right here! This product you’re holding is the product. He even gave you instructions on how to set up your account on ClickBank (a digital product marketplace) so you can start selling right now! And you get a 75% commission out of every sale you make!

Did you see that? I’ll give you a moment to see if you realised it.

Stumped? He just recruited you to be his affiliate. Know that even though he only gets 25% out of your every sale, he still gets 50% (or whatever commission rate he got) out of every sale in the affiliate links inside the product that you are helping him sell.

This is multi-level marketing in the swiftest execution form I know. The only barrier is that ClickBank only allows up to a 2nd level tier commission scheme. This’ll take forever to explain if I also explain the tier system, so I’ll just stop here. But a cursory search online should provide you with answers.

I actually signed up with ClickBank, just to see what it’s all about. And his product was already flooded within ClickBank. The early affiliates had already gotten sales, and the (ClickBank) market was saturated with the product. So I wasn’t going to get any sales.

But it was still an enlightening process. I’m sure the guy is a nice person. I just don’t approve of some of his tactics.