Compiled by Frederick Mann
Copyright © 2003 Build Freedom Holdings ALL RIGHTS RESERVED
On 7/12/03 I posted the following to the Economic Rebels forum (now called Bigboostergroup):
This post may be very important to everyone in this forum who hasn't yet filled their first MyNewPC matrix, or who isn't making steady progress toward filling it.
You are currently at point A (incomplete matrix) and you want to get to point Z (complete matrix).
You could study the 50/50 Plan -- send a blank email to: RusPlan@infogeneratorpro.com
Also #TL10E: THE POWER OF DOING THINGS RIGHT.
Then you can draw up a plan for advancing from A to Z. You're welcome to post your plan here and get feedback.
Once you have a satisfactory plan, you implement it. If your plan doesn't work, you change it.
However, your level of competence may be such that no matter what A-Z plan you come up with, you'll fail when trying to implement it.
Let's think in terms of point 0 (very low competence) to point 10 (high competence).
In order to succeed with any A-Z plan, you may have to first devise and implement a 0-10 plan to raise your competence above whatever threshold is necessary to succeed with your A-Z plan.
I invite everyone in this forum to post their A-Z plans and/or 0-10 plans.
Frederick
In May, 2003 I announced a BUSINESS SENSE COMPETITION for which I wrote:
Possibly, I've identified something very important. When you're trying to make money on the Internet, you're really trying to launch or grow a business -- even if you don't realize it.
The problem is that some people lack the BUSINESS SENSE to succeed...
Those who provide the best answers, in my opinion, to questions A, B, C & D will receive prizes:
A. What are the elements of business sense?
B. How can people learn or acquire these elements and become more successful in business?
Internet Marketing For Beginners & Professionals contains a scale that could be adapted as follows:
IBB - Internet Business Baby - The equivalent of a baby who can lie on its back, cry, smile, wave its hands, and wiggle its toes, but cannot yet crawl.
IBC - Internet Business Crawler - The equivalent of a baby who has started crawling.
IBW - Internet Business Walker - The equivalent of a two-year old who has learnt to walk, but cannot yet run confidently.
IBR - Internet Business Runner - The equivalent of a 12-year old who can run confidently and seldom falls.
IBP - Internet Business Professional - The equivalent of a 20-year old athlete who can successfully compete with the best athletes of similar age.
IBG - Internet Business Guru - The equivalent of Michael Jordan, Tiger Woods, and Lance Armstrong.
In order to acquire more business sense, it may be useful to define and elaborate on a scale such as the above. In order to acquire greater business skills, it may help for people to assess their own level, so they can find the best starting place.
C. What elements of business sense have people mastered at each level of the scale?
Report #TL80A: CREATIVITY REPORT #1 includes a formula that could be applied to bring a business into existence. Possibly "finding out where you are" needs to be included in the "non-existence formula." A scale such as the above can help people find out where they are.
Many of us have spent 10 years or more in government concentration camps for brainwashing and mind destruction, euphemistically called "schools." Our learning capacity may have been impaired to a greater or lesser extent by this "treatment."
The challenge of recovering from "schooling" is addressed to some extent in #TL03C: How to Wake Up Your Desire to Learn, Grow & Succeed. This report may also include some elements of business sense.
More elements of business sense can be found in:
D. What prevents people from succeeding in business? ...
The most important is common sense!
The majority of people who lose money or get into problems on the Internet make elementary mistakes -- they leap before they look, they think that the more is promised the better the opportunity, they jump to conclusions without evidence. There is such a wide array of common mistakes of this nature that it is impossible to list them all. But it is easy to recognize, and I attribute my success largely to common sense, and the advice I give to others flows largely from pointing out things that I regard as common sense.
Second is keeping good records!
Commit everything to paper, print the terms and conditions, print the results of any due diligence you have done or been given. If you are confident about keeping good records and backups on computer, that's fine. If you plan to run an Internet business it is important that you do develop good computer skills or include people with these skills in your team. But most people don't have the requisite skills and lose track of things eventually. Note particularly that you can't assume that because information is available on a website or autoresponder that it will be available there forever -- it is important to take a copy. Your written documentation should include your risk assessment and business plan, as well as cash outlay and income.
Third is doing some elementary research to quantify and manage your risk!
This may not satisfy commercial standards of due diligence, but the more you can document independently the lower the risk is. On the Internet anonymity is the enemy of due diligence, but there is still a lot you can find out, and it is worth following up. This includes finding out about the people, the product and the market and making your own assessment about the claims made. For example, if you wouldn't pay that much for a product why should other people? If what is being sold isn't worth the price asked, then you are just in a glorified pyramid/Ponzi. This is elementary marketing sense! The main thing I do is quantify the risk for each opportunity I consider, and then the risk/return tells me whether to go into it or not.
Fourth is to have a product!
This doesn't worry some Internet businesses -- but those without a real product will all crash and burn as a Ponzi. Those with an idea that hasn't been commercialized as a viable product will also crash and burn -- it takes time and capital to bring an idea to market.
Fifth is to have and preserve enough capital!
Most companies that bring a product to market and crash do so because they have expanded faster than the capital can support. Most Internet investment products are designed based on the average or the best performance figures, and then crash because when the inevitable bad times and failures come they do not have the ability to meet their promises. A good business plan will provide a capital buffer sufficient to ride out the inevitable ups and down and will plan in stages -- e.g. an initial stage until break even is reached (if capital outlay is required or a buffer must be set upt), a steady state when regular profits come in and are distributed, and a wrap up phase when everything is closed down and capital returned. Promises will be along the lines of best efforts and conservative targets, with windup provisions in place for when things go irretrievably wrong.
Sixth is to be first!
The above applies to all business opportunities, and on the web that is mainly opportunities that are offered to you and millions of others. The earlier you are in the more chance you have -- especially if it is MLM, pyramid or Ponzi. But even for a conventional business, it pays to be first -- but only if you also do the research and understand the market. In fact it is often the person who comes second or third that has the business sense (mainly common sense and marketing sense) that make the money -- the first person is often too emotionaly tied up with the concept, too overburdened with the capital outlay required to bring the product to market and too concerned with the technical challenges and the nature of the product to worry enough about the market or the business or common sense -- our first three points have been ignored to focus on the next two. That's why being first is last and least important.
It takes brainwork to actually think, digest and evaluate. It takes time and energy to consider all the ins and outs, to keep good records, and to do research/due diligence. It takes discipline to put in the spadework, the time and the sustained ongoing energy.
The easiest and best way to learn the ropes is to be apprenticed to a successful entrepeneur or expert. Second best is to do a course -- and make sure you ask lots of questions and get a individual attention as you can get. Third best is reading -- but if you haven't got a mentor or teacher, this is the hardest route. The best route is to combine all three. Get a mentor who can apprentice you and you can relate to, enrol in a course that teaches the formal background needed and fits your mentor's style and yours, and read all the set reading and more -- especially paying attention to the approaches that don't fit the school or mentor you are following.
If you can't make the business and the discipline fun, then chances are you won't make it a success either as you will lose motivation. So this is not an optional extra, but all five of these aspects to discipline are essential.
Lack of 3, 4, 5 and 6 we have discussed above in terms of the positive attributes we need to have. So let's focus on the negative attributes we need to avoid. So let us illustrate 1 and 2.
We will take a trader with a 90% success rate who sets up an FX HYIP promising 20% a month. Let's forget about the Internet and webdesign skills he doesn't have, and the time that needs to be put into communicating with his members and updating his site. He is in his third month of exponential growth -- 10 members, 100 members 1000 members -- at $100 minimum he has taken in around $2K, $20K and $200K in these months. He was bang on target for the first two months -- in fact well ahead, with twice the $40K he needed to pay out as promised so he has $20K in profits. But this month, instead of making a 40% gain, he makes his worst case 40% loss -- he's down $88K. Fortunately he gets another 1,000 members and so he is able to use the additional capital to pay out the $44K in interest due, and still put $112K into his trading. But then -- nightmare -- he makes another 30% loss.
He has had $222K invested and lost $88K and paid out $44K so only $90K capital remained before the new $200K capital came in. Now of this $290 capital he has lost 30% and paid out another 20% as promised. He has only $145K capital and he should have $422K. Next month he is happy -- he has made his 20% minimum and happily pays our $84K -- except that he earned 20% of $145 which is just $29K and is thus down $44K and has only $90K capital under management. He gets in another $200K capital and breathes a sigh of relief -- he now has $290K to trade, although his members have invested a total of $622K. This month wasn't that bad -- down 10% is really a pretty minor drawn down. Only problem is he is due to pay $125K which he does, even though he actually lost $29K. So now his capital is $136K when it should be $622K.
By now the news is out that FX traders haven't been having a good time of it due to chaotic world events like SARS -- and three of the most well-known HYIPs collapsed this month. He doesn't get one deposit this month even though he has paid the exact amount on the dot every month without fail. Next month he again did relatively well in the bad trading conditions and lost only 10% but is due to pay $125K again. But $136K - $14K lost is $122K -- so he antes up $3K of his own money (from that first $20K of profits he took out). But now the only capital he has is the rest of that $20K -- except that he has already spent half of it. He has just $7K from which he has to pay out $122K a month... He pays the money out but he is too shakey to trade effectively and loses half of it -- he decides to do a runner.
This was an honest trader, but his program ended up being run like a Ponzi with interest being paid out of capital. What went wrong?
First he didn't set up on a best efforts basis, but made promises he could keep on average but not during a start up-phase when capital was rising and he had no buffer. It really only took one bad month to show that his scheme wasn't viable. But then fear and pride took over -- he couldn't admit that he had made a mistake or a loss, he couldn't risk people leaving or putting people off joining. So he tried to make the best of it. The good trading programs do make mistakes and do have losing months, but they have an open relationship with their members and keep them informed and work to recover the funds they have lost. They do not pay out profits in months where they have made a loss!
The mistake in setting up the program wasn't irretrievable - although common sense and some preparatory analysis could have avoided it. But the big mistake was to allow pride and fear to take control and start eating into capital to pay interest rather than biting the bullet and changing the rules - and wearing the cries of scam and fraud that would inevitably have come from the babies amongst our investors. The pros and the superatheletes would have just nodded however, and said: "Could see this coming a mile off - at least this one is honest and can deal with his mistakes. Let's stick with it and see what he can do."
There is really a second example here, where the trader makes the courageous decision of moving to a "best efforts" basis and says: "The 20% is my historical average return after my overheads and fees. In some months there are losses, and no returns will be paid, but in others there will be big profits and above 20% returns will be paid." In fact, given he made 40% in his first month he could have paid above his 20% target and attracted even more people into his funds - that would have been far better use of his extra $20K windfall profit.
So now let us look at an investor faced with these two programs. Two traders, both trading the same strategy by the book and averaging 20% a month. But one operating at 20% a month, and one on a "best efforts" basis.
Our IBR who has been in HYIP for 12 months invests the minimum in both programs - he has learned that is the appropriate amount for his means. He has seen the evidence of the trading records for these two traders, as attested by some trustworthy listowners - he has done all the homework that can reasonably be expected and has even found out phone numbers and addresses for these two traders.
The twenty-percent trader (TP) pays 20% for five months and then disappears in the sixth month. The best-efforts trader (BE) pays 30%, 0, 0, 20%, 0 and then closes to new members in the sixth month. A solid strategy is to put in an amount appropriate to the estimated risk, and as fast as possible recover all your capital from the interest and then compound 50% of income once you are in profit. That's IBRs plan, and it is a good one!
But at the end of the fifth month, IBR deviates from his plan. With BE, our IBR decides that BE is not reliable enough and he isn't particularly interested in the explanations -- so he withdraws his capital and thinks fearfully: "This guy is obviously struggling and is sure to be a runner so let's get out while the going's good." On the other hand, our IBR is pleased that he has got $100 back from $100 deposit with TP and thinks -- "I sure can pick them!" -- and he doubles that, depositing a further $200 ($100 BE capital and $100 TP interest). So instead of breaking even when TP runs, he loses his whole $200 capital except for the $50 he made make from BE -- the one he didn't like that keeps on going.
What did he do wrong? He didn't stick to his plan -- a good plan. He didn't research what was going on and consider whether BE was paying reasonably in the market conditions. He figured he'd picked a winner in TP and added more contrary to his plan. In summary, he acted on the basis of fear and pride rather than objective facts from diligent research. And he lost $150 in capital and untold future profits in BE as a result.
Another example is essentially a true story. A university in a small country develops a power management chip and with a local electronics company [call them the "Unile" consortium] develops the world's first laptop. Unile becomes a success in their home country, but then IBM releases its PC and Unile doesn't spend the capital on ensuring compatibility -- even though they are using an 80X86 processor. Rather, Unile branches out around the world and their laptop really takes off in a big European country. A year later, Sharp and Toshiba enter with IBM compatible laptops, but Unile doesn't have the capital to compete with them in the international marketplace, and so much capital has been sucked up by Unile's premature expansion that they can't even serve their home market let alone provide laptops to a market 5 times the size let alone an International market 50 times the size -- and they never achieve IBM compatibility. Apart from that, technically their hardware and their software were better than any of their competitors! They got taken over twice by other small local companies and eventually disappeared without a trace.
What did they do wrong? They underestimated the capital and time requirements for penetration of international markets, they didn't make international partnerships with understanding of the markets but tried to go it alone, and they didn't respond to the market forces once IBM and the Japanese entered. They could have made it a go if they had concentrated on having the best product, consolidated their home market and licensed the technology to international players. But pride dictated that they should go it alone internationally, and fear forced them to compete head-on-head in the international markets rather than consolidating their product and their home market. Who knows what their business plan was, but it should have been very different from what they actually did!
For instance, you may be a 4, but apply good advice that lets you perform like a 6. On the other hand, you may be a 6 (and not complacent, hopefully!), but due to trickery you get the results of a typical 1 (naïve sucker). A 100% loss doesn't care who chalks it up. The differences start showing up in how one reacts to the profit or loss. In profit, a 1 might not even notice why things worked out and simply blows it all on trinkets; a 6 notices and might roll half of it back into a business. In loss, a 1 might give up forever; a 6 looks for lessons learned and what's next.
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