Every monopoly story has its inspiringly inauspicious beginnings.
The JP Morgan Bank started with JP Morgan’s father, Junius, working as a clerk for a now unknown merchant banker, George Peabody in mid-19th century London.
Standard Oil started with John D. Rockefeller ensconced in the corner of the Hewitt and Tuttle, pouring over the books, “delighting in all the methods and systems of the office.”
Zuckerberg started in his dorm room and Steve Jobs out of his garage.
The most recent case I ran across started in the remote parts of Asia and passed through the tidy Amish farmland of Eastern Pennsylvania on its way to monopoly status.
In an interview with James Altucher, Kevin Kelly, the author and “Senior Maverick” of Wired Magazine recounted his career trajectory and the trajectories of others he’s worked with that suggest a route to monopoly.
Stage one of a career means getting competent at something. You get that first job whether it’s a newspaper route, bagging groceries, or your first job out of college – and you just want to be competent at it.
Slowly that feeling dissipates. You’re not worried about being fired, you want to get good at what you do.
And so you get good at it. That’s stage two.
Once you’re competent and good at something, then—in stage three—you want to get paid well for it. This is a very normal career trajectory and has been for most of the twentieth century. It’s after stage three that most people stop.
But Kevin points out that there is, in fact, a final stage, and it’s the one monopolies, those high-margin, highly defensible behemoths are founded on.
The Work Only You Can Do
Maybe you shudder a little bit at the ‘new agey-ness’ of that statement. I shudder a bit at it. It’s diabolically close to “follow your passion.”
“Stop thinking you’re a special snowflake” is frequently good advice. No matter how committed you are to a diet, if you put a chocolate cake in your fridge, you’re likely to eat it sooner or later just like anyone else would. If you don’t commit to a ritual, you’re not likely to produce great work.
I’ve always been repelled from the “follow your passion” crowd. Mindlessly pursuing your pure, unadulterated passion in the moment does not a business strategy make.
Yet, you are a bit special snowflake-y. You’re still a snowflake, you’ll still melt when it gets above freezing, but under the right conditions you have unique characteristics.
Finding “the work only you can do” is the foundation of something which I’m inherently far more attracted to than a delusional conception of “passion” oversimplifying the complexities and nuances of entrepreneurship—and, frankly, reality:
The characteristics of high-margin, highly defensible monopolies in the post-internet era.
Yes, that sounds much more fruitful (and profitable).
Blue Ocean Strategy And Mini-Monopolies
I’m not the first one that thought “high margin and highly defensible” was a good premise for new business opportunities – it’s the premise of the bestselling Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne.
The essential idea behind Blue Ocean Strategy is that of value innovation: offering new products that create “blue oceans” of uncontested market space by pursuing a better cost structure (giving you access to a bigger market) and differentiation at the same time.
Let’s take the example used in the book of ‘Yellow Tail Wine’.
Before Yellow Tail, the wine market was divided into two distinct segments: budget wines and premium wines.
The wine market on the whole was shrinking, and existing competitors were fighting to hold on to market share. And yet, in the span of a decade, Yellow Tail emerged as one of the top five most powerful wine brands in the world.
How? It value innovated to create a blue ocean. Instead of only appealing to traditional wine drinkers, it brought in more casual cocktail and beer drinkers. Yellow Tail was the first wine I ever drank. I was 19, had no conception of taste, and it was sweet, fruity and cheap. As wine connoisseurs sat around criticizing Yellow Tail for lowering quality and working against the proper appreciation of fine grapes, Yellow Tail not-so-quietly ate their competition’s lunch (and their market share and profits).
Reading Blue Ocean Strategy, I realized that the same phenomenon—creating high margin and highly defensible market spaces—happens in small businesses and in entrepreneurial careers.
What Blue Ocean Strategy suggests for larger organizations through the use of 5×7 matrices and data graphing is just as applicable to smaller organizations and individuals through simpler means.
Kevin Kelly is himself an example. Kevin is the former editor, now “Senior Maverick,” of Wired magazine. Kevin spent a lot of time wandering around rural Asia, through rice paddies and primitive villages, a seemingly strange place to start a career defined by technology. There was so little of it there compared to the West—a hand tool or a bowl were, and still are, cutting edge technology for people in some parts of the world.
Yet, it was that perspective Kevin brought with him as a writer for The Whole Earth Catalog, a predecessor to Wired Magazine. He was brought into Wired because he was one of the first people tinkering around on this new technology called “the internet.”
Beyond his position at Wired, Kevin has written a series of books, including the remarkable What Technology Wants, which expounds on the nature of technology and it’s similarities to biology.
Kevin has created a blue ocean career for himself. His work is work only he can do, there was not a person on Earth that could have written What Technology Wants other than Kevin.
In doing so, he’s created a high-margin, highly defensible position in the market. Publishers come to him, not the other way around.
There is no other Kevin Kelly. He’s a monopoly.
Two Primary Characteristics of High Margin, Highly Defensible Monopolies
1. Built Around Unique Abilities (Or a Combination Thereof)
Our innate biology is poorly suited to understanding outcomes in modernity. Intuitively, we assume outcomes follow a normal, gaussian distribution, simply because most biological systems do.
Take height, for example. The average height for a male in the U.S. Is around 6’0 tall. Some are a bit taller or shorter. And then a few are much taller or much shorter.
That’s not the case with distribution in any non-biological systems (as technology advances, most systems are non-biological).
A minutely small number of people own a large portion of the wealth, and land, and domain names, and televisions – this fact first observed by Italian economist Vilfredo Pareto is now commonly known as the 80/20 rule.
While many people have begun to grasp that the concept applies externally to land or wealth, the same power law principle applies internally to your individual skill set. If you were to think about your skills as being displayed in a power law graph, you have a small number of skills which produce a disproportionate number of results for you.
I am terrible at a lot of things. I’m extremely forgetful—I left my car in drive and got out of it in a parking lot last week. I have a horrible rote memory and will forget everything from a conversation I had less than twenty four hours ago.
While this has always been true, the internet has magnified the inequality of the distribution of outcomes. Whoever is the best in the world at something will enjoy dramatically outsized rewards to someone that is second or third best. The #1 search result in Google gets 33% of the search traffic. There can be ten million other results, but the first result will get 33% of all the clicks.
What’s more challenging, is that your particular skill set is something you’ve probably never heard of before. Scott Adams, the creator of Dilbert, has created a monopoly by building on his strengths. He’s tremendously productive (to the tune of $75 million), but the route to that productivity wasn’t paved by traditional notions of boundedness around skills. Scott Adams didn’t go to cartoon school. He worked for 15 years in a crappy company, so he understood corporate culture; he liked cartooning as a kid; and he had a flair for entrepreneurship as evidenced by a track record of failed businesses.
The problem that Kevin Kelly and Scott Adams exemplify is: we have industrial notions of boundedness around skill sets. When you ask most people what they do, they fall into a fairly small number of buckets, most of which are classes at a University: I’m a marketer, I’m a designer, I’m a software engineer.
That’s typically how people describe their strengths.
Yet, those are all commodity skill sets.
Lots of people are marketers, designers, and software engineers.
It take a lot more time, but yields much higher rewards, to reach the point Scott Adams did—“I’m really good at drawing cartoons which satire corporate America” is not commoditazible.
While the internet has changed a lot of things about how business operates, it hasn’t changed how monopolies operate: they command high margins and are highly defensible. For as much as anyone may complain about Paypal fees or Google collecting data, we all still use them.¹
In an industrial economy, increased productivity is achieved by working on complicated projects. That is, projects where you can go from A to Z. It may require 26 steps, but the path is clear. You go to college, you go to graduate school, you get an entry level job, you get a mid-level manager job, you get a c-suite job. The path is pretty well laid out.
Boundedness in the entrepreneurial economy is complex instead of complicated. It can be rationalized and subjected to the narrative fallacy in retrospect – looking back on Kevin Kelly’s or Scott Adams career you can see how they ended up where they did, but standing in a rice paddy in Cambodia, few would have predicted Kevin a futurist thinker on technology. It’s not clear how to get from Step A to Number 5. They are in different domains. You must cross traditional boundaries.
Productivity, and profits, in an entrepreneurial economy are achieved by working on complex projects where progress isn’t made in a straight line, but in a seemingly rambling, meandering path, combining different concepts, skill sets and experiences from different domains.
2. Exists in a Growing Marketplace
If you take a mediocre entrepreneur with a mediocre product and you put him in a rapidly expanding market, she’s going to do ok. If you take an exceptional entrepreneur, with an exceptional product in a really terrible market, she’s probably screwed.
As 80/20 guru Perry Marshall recently related to me: lots of dumb investors made money in the boom market leading up to 2008. Lots of smart investors lost lots of money in the crash.
Market always wins.
If you had to pick a single factor that would predict the success of a new business, it would be operating in a growing market. Yet, when you look out at growing markets, incumbents often seem unassailable.
What’s the largest Customer Relationship Management platform? Salesforce.
Who’s the second largest? I have absolutely no idea – which is precisely the point.
The concept of wealth creation – that in a post-industrial world, wealth is not fixed, but unlimited – is broadly understood in Entrepreneurial circles. There are hundreds of millions more people alive today than there were two hundred years ago and, on average, they are much better off than they were two hundred years ago—we can make more wealth, and have.
The less-recognized fact is that we can actually make more markets, and we can do so more easily now than ever. While the Industrial Revolution unleashed wealth creation, the internet has unleashed market creation in the form of the Long Tail.
One of the first industries affected by the Long Tail was music. Derek Sivers, founder of CD Baby, a company that distributes CDs for independent musicians, told me the story of a woman who sold tens of thousands of albums of songs just for sailors. She lived on a boat and wrote all her songs for people with similar lifestyles. Albums for sailors is now a real market – not a huge one, but a real one. That simply wasn’t possible before the internet.
Everything in the way we are raised and conditioned indicates to us that this is not true. Everyone takes the same math test. Everyone chooses from the same set of classes in college. Everyone chooses from the same set of jobs on Monster.com. This is not the way the world today actually works. There are, in fact, an infinite number of choices available.
There wasn’t a job ad for “‘Senior Maverick-and-futurist’ at ‘not-yet-existing magazine’ covering ‘not-yet-existing technology’” thirty years ago, at the beginning of Kevin Kelly’s career. Nor was there a job ad for “cartoonist cleverly satirizing corporate America.” Kevin Kelly and Scott Adams to some extent discovered, and to some extent created, those markets.
Just as we aren’t good at redefining boundaries of our skill sets in non-traditional ways, we aren’t good at realizing that market boundaries can be redefined just as easily. By eliminating geography, the internet has both created more markets and also made it significantly easier to redefine those markets’ boundaries.
There are more and more markets than ever because of the Long Tail. And because we invented wealth creation, many of those markets are growing or fragmenting off into smaller markets that are growing.
AirBnB, now a $20 billion dollar company, was founded off the back of Craigslist’s classifieds section. There will, I suspect, be hundreds of companies founded off of Craigslist before it’s all said and done.
Because the internet has democratized distribution and production, our interests are more niche now.
Beardbrand, a company that only offers “beard care products for the urban beardsman” likely doesn’t exist in a pre-internet world. In a world limited by geography and the high overhead of owning a physical retail store, that’s a much less viable market than it is in the post-internet era.
Even businesses’ actual geographic locations benefit. CrossFit took an existing market (fitness) and carved out a new blue ocean. And you can redefine even within the CrossFit market. There’s a CrossFit gym I just found that does Crossfit and MMA. They’ve redefined that market for people that like both of those things. They can be the best CrossFit/MMA gym in Austin (a growing market).
The punchline here is this:
- There are more markets than at anytime in human history.
- On the whole, they’re growing.
The question then becomes: How can you find your unique strengths, to do the work only you can do, to serve a growing market?
This is the nexus where people get rich in the Entrepreneurial Economy.
4 Strategies To Find The Work Only You Can Do
I’ve dropped more than a few hundreds of dollars on tests and quizzes and spent more than a few hundred hours working out the best way to answer that question that promise to give the answer to that question. To the extent I’ve been successful, I’ve found four strategies more helpful than the rest:
1. Find The Resistance. Run Towards It.
Most of us have two lives. The life we live, and the unlived life within us. Between the two stands Resistance.
Are you paralyzed with fear? That’s a good sign.
Fear is good. Like self-doubt, fear is an indicator. Fear tells us what we have to do.
Remember our rule of thumb: The more scared we are of a work or calling, the more sure we can be that we have to do it.
Resistance is experienced as fear; the degree of fear equates to the strength of Resistance. Therefore the more fear we feel about a specific enterprise, the more certain we can be that that enterprise is important to us and to the growth of our soul. That’s why we feel so much Resistance. If it meant nothing to us, there’d be no Resistance.
-Steven Pressfield, The War of Art.
Nothing in my life has been a better indicator of what I should do than finding where The Resistance is blocking my path and running towards it.
Any act which foregoes short term pleasure in favor of long term gain will, without fail, elicit The Resistance.
That feeling before you make a cold call? The Resistance.
The person telling you that you can’t launch a new venture or lose another 10 pounds? The Resistance.
That expensive qualification you think need before you can do the the work only you can do? Hellooo Resistance.
Run towards it.
As part of my weekly review, the first question I ask is: Did I Move towards the Resistance? Am I avoiding confronting insecurities or ugh fields? What don’t I want to think about or talk about?
2. Do an Anti-Productivity Productivity Day
The anti-productivity productivity day is a concept that I created based on an article from Marc Andreessen. Marc advocates not sticking to a schedule for a whole year. Pick whatever you feel like working on when you wake up, and go work on it.
While that’s difficult to do for a whole year, it’s quite easy to do for one day. I like to schedule at least one Saturday a month as my anti-productivity, productivity day.
A friend that runs a high-end web design agency did this experiment a few times – he always ended up setting up and attending meetings for the entire day with clients or potential partners.
Unsurprisingly, he is a killer in person salesman and speaker, and has seen more growth in his business from speaking and meetings than anything else.
3. Embrace Via Negativa Productivity
As any truly prolific individual will tell you, productivity is an act of subtraction not addition. The process of eliminating or outsourcing my least productive tasks has created more space for me to move further up my own power law graph into exponentially higher levels of productivity.
At the end of my daily ritual, I ask myself: What’s the Least Productive thing I did today?
While it can be hard to see what you are supremely at, it’s much easier to see what you are bad at and get that out of your life.
4. Discover Your Unique Ability
You possess a kind of inner force that seeks to guide you toward your Life’s Task— what you are meant to accomplish in the time that you have to live.
In childhood this force was clear to you. It directed you toward activities and subjects that fit your natural inclinations, that sparked a curiosity that was deep and primal. In the intervening years, the force tends to fade in and out as you listen more to parents and peers, to the daily anxieties that wear away at you. This can be the source of your unhappiness— your lack of connection to who you are and what makes you unique.
The first move toward mastery is always inward— learning who you really are and reconnecting with that innate force. Knowing it with clarity, you will find your way to the proper career path and everything else will fall into place. It is never too late to start this process.
– Robert Greene, Mastery.
The final technique I’ve used is one I modified after I read The Unique Ability Book to send out an email to my friends. I picked people from all different areas of my life – college, high school, first jobs, second job, different countries and sent them all the same template email asking what they thought my strengths were.
This was far and away the most useful of all the activities – I was shocked by how similar all the responses were. People that knew me from totally disparate areas of my life, including different countries sent back remarkably similar responses. Nine of the ten involved the exact same phrase and it’s shaped a lot of how I’ve approached my business in the past year.
If you’d like a free template email to send out, click here to download the Unique Ability Email Template.
There’s No Substitute for Staying on the Bus
In downtown Helsinki, there is a bus station with around two dozen platforms. Hundreds of buses leave from the station each day. They set off on the same route for the first mile, stopping two or three times, all at the same set of stops.
Metaphorically, imagine each stop as a period in your life. Despite being on a different bus from everyone else, you stop at all the same stops. What most people do is they get two or three stops down the road, realize they’re on the same route as everyone else, get off and grab a cab back to the bus station – life is short.
They get on another bus and two or three stops down the road again, they look around to see they’re on the same path. They get off and hop another cab back to the bus station.
But what happens is that after a mile or so, the bus routes fork. The 21 heads South and the 71 heads North. Eventually, the tendrils of bus routes stretch far out of downtown Helsinki, each ending it’s own unique, monopolistic destination.
Originally written as a commencement address for the New England School of Photography as a metaphor for young, ambitious photographers, the Helsinki Bus Station Theory solution is unglamorously simple and effective:
Stay on the bus. Stay on it.
While all four of these strategies have helped myself and others get closer to uncovering the unique skill sets monopolies are built on, there’s no substitute for staying on the bus.