‘Location Independent’ as Sustainable Competitive Advantage

Duh, Duh, Duh. Duh, Duh, Duh.

I throw a pillow over my head even though I know it’s useless.

It’s 7am on Saturday in Vietnam and that means jackhammering time. I hear the beep-beep of the motorbike horns outside now. Saigon couldn’t care less I spent 2 hours tossing in bed last night.

I run through my morning ritual and after a quick good morning to my landlady which mostly consists of both of us smiling and nodding as though the other were a toddler, I head out for the ironically Korean-owned, French cafe down the street to get a cà phê Americano and write.

Not 50 feet out the door, a motorbike pops onto the sidewalk and cuts me off to get into the construction site on the other side of the street

A petite (even by Vietnamese standards) elderly lady smiles at me revealing the deep creases running from the corners of her mouth up to her ears springing off her stool offering up a baguette – “banh mi?”

A recent Atlantic piece cited research by Gallup that Vietnam was the most pro-free market country in the world.

You feel the opportunity on the street, in the density of the air. Saigon hums and vibrates in a way no other city I’ve been to does. There’s a sense of possibility that whispers to you with such persistence as to feel almost relentless.

Anyone that’s ever lived in a different place from where they grew up or travelled for an extended period of time knows where you are affects who you are, sometimes subtly and sometimes profoundly.

The output of a person or organization are a combination of factors both internal and external.

Often overlooked, or seen as unchangeable, location is one of the most powerful of the external forces.

When I explained it, I like to describe location as a lever that gives me more or less leverage in certain aspects of my life and business depending on where I am.

For the location independent or semi-independent, there’s a growing opportunity to strategically position and pull on those levers.

We’re sitting at a point right now in the location-is-becoming-irrelevant curve where those for whom location has become largely irrelevant can gain leverage by hopping around the location-is-still-highly-relevant world.

The 3 Factors behind 10x Location Leverage

The Power Law of Locations

When I moved from San Diego to Austin in the middle of this year, I spent weeks trying to find good Mexican food in Austin and always ended up disappointed.

I reached a somewhat surprising conclusion, the quality of Mexican food in San Diego exceeds pretty much everywhere else in the U.S. by a factor of ten. A mediocre Mexican restaurant in San Diego, transplanted to Austin, could put the rest of the city out of business.

You see the same highly geographically concentrated expertise in manufacturing hubs. Certain “villages” in China make a 10x better certain class of products than anywhere else in the world.

I suspect almost every major city or part of the world has something that it’s 10x better at than anywhere else.

Silicon Valley is likely 10x better for raising venture capital than anywhere else in the world. New York is probably 10x better at investment banking and Los Angeles may be 10x better at making films.

The Power Law of Interactions

The location-is-still-highly-relevant world is driven by context. Despite the advancement of digital communication technology like email or skype, our deepest relationships are still with people we’ve spent a lot of analog face time with.

Context matters. A lot.

At the beginning of this year, I went to a trade show in Orlando. We’d launched a new product line 2 years earlier, but this represented our first in-person marketing effort.

We’d successfully barraged the show organizer with enough phone calls and emails that they’d relocated us to the front row of the convention hall. When the doors opened at 9am and the bag-toting, photo snapping flock of attendees poured in, we were flooded for over an hour answering questions, explaining the product and making sales.

As the flood receded, I turned to look at my co-conspirator, Alasdair, and we both had the same shitty grin on our faces.

“Holy shit, that was crazy.”

In an hour long period, we’d learned more about our customers and how they saw our products than in the preceding 2 years.

On one product the counter rose too high, the LED battery cable wasn’t protected properly, and on another the component parts didn’t store easily without a case.

Ignore my shoe choice… Focus on the pretty girls.

I’ve been to seven more events this year and it’s lead me to believe the Power Law of Interactions:

In-person is 10x more powerful than the phone. The phone is 10x more powerful than email.

This is driven by context and trust.

Context

Context drives a lot of communication and higher context encounters, just like in-person meetings communicate more efficiently than low-context encounters.

How long have you spent crafting an email to get the tone just right when you could have handled it in person in minutes?

Missing in email are all the subsets of nonverbal communication. Voice, touch, distance and physical environment. Also missing are proxemics – the informal space around the body; and chronemics – how we use time.Throw in oculesics, the actions of looking while talking and listening.

Additional subsets of speech that are missing include voice quality, rate, pitch, volume speaking style, rhythm, intonation, and stress.

Email misses a lot of context we’ve evolved to include in how we communicate and so it’s not unusual to think an hour in person could foster more trust and mutual understanding than months of back and forth emails.

Trust

What we know from the National Association of Realtors is that more than 70% of people who list a house pick the first realtor they call first. So the goal is how do you get called first, not how do you prove that your yield on a percentage basis is better than everybody else’s yield.
Seth Godin – Start Up School

Trust builds faster face-to-face. People take you more seriously when you show up. It implies a certain level of commitment and investment that is absent in digital communication.

Because sending an email or a tweet has become so cheap, we rightly disregard a lot of digital communication.

The cheapness of digital communication gave rise to an entirely new form of mild harassment, trolling.

There’s a whole lotta of jokers behind laptop screens, but there aren’t a lot as many showing up at the conference or office.

There’s a reason outside sales teams still exists. Many sales guys can close 10x more worth of deals in person than over the phone and 10x over the phone than in email.

Depending on how you price your product or service, in person may not be efficient at scale, but it’s a great way to accelerate the startup process.

Feedback Loops

If you need to get a site or a product designed, why not show up to the designer or manufacturer’s office? I’ve talked to people that have shortened development cycles from months to weeks just by showing up.

Feedback loops obviously slow the process down, but they also make it less accurate. Because everyone’s model of reality is constantly shifting, constricting feedback loops gives more benefits than just saving the time it takes for the information to go around.

Jimmy Hayes and Doug Barber from Minaal moved half an hour away from the factory where their flagship carry-on bag product is manufactured during the initial production run.

Instead of managing the process using fuzzy photos and long email explanations, they showed up to the factory the day each new prototype came out.

Showing up in person to the most competent factory in your industry to source a product then showing up to the biggest event in your industry to sell it could be a 100x investment compared to doing it all remotely.

Leverage Points

If we imagine location as leverage, here’s some of the longest levers I see floating around the entrepreneurial, location (semi)-independent crowd.

Sales and Marketing

Whether it’s a new business, a new vertical or a new product line, the more feedback you can get early on, the faster you can see traction. Starting with high context steak dinners accelerate the path to Cambodia Cash.

I’ve been to 7 conferences this year (thank God for frequent flyer points) and I feel like I get 2-3 months of laptop work done at each one.

A lot of people that say they suck at sales, don’t actually suck at sales, they just don’t understand their customers or have an established level of trust with them. Showing up in person or getting on the phone can sort this out pretty quick.

I talked with a guy that built his business by going to 24 conferences his first 2 years in business. That means one week a month for TWO years, he loaded up products into a truck, popped in some Tom Petty, and drove all around the country. Something his competitors couldn’t (or wouldn’t) do.

Beyond building trust, showing up lets you understand your customers and build a deep sense of empathy with them and that translates into your marketing.

If you look at really highly converting offers online or offline, it’s not that they’re clever or exceptionally good copywriters, it’s that they REALLY understand their customers. Sometimes that’s because they’re in their own target market, but more frequently than not it’s because they’ve spent a lot of belly-to-belly time with them.

All this trust and context translates directly into your marketing to allow for scale.

When we got back from the conference in Orlando, we understood exactly how our customers thought and exactly how they talked. We re-wrote half of the copy on the website and in our email autoresponders as a result.

Communities and Hubs

Go where the best people in your industry are. Just like the Mexican food in San Diego or manufacturing in China, industries are often geographically concentrated because they’re maximizing context.

I was talking to Stan LeLoup a week ago who said he got 10x more done on his business living in Saigon than Paris. By optimizing his location to be around a community of entrepreneurs, he got 10x more done than he would have otherwise.

Want to do internet marketing? Go hang out with internet marketers. They’re all right here.

If you’re trying to learn a new skillset, why not find out where the master is and hop on an X-wing to Dagobah?

Looking back over his 40 years at Bell Laboratories (which was responsible for the laser, information theory and 6 other Nobel prizes), Dr. Richard Hamming tried to answer the question, “Why do so few scientists make significant contributions and so many are forgotten in the long run?”

While he acknowledged the role of luck, he listed the factors most important in maximizing your opportunity to do something really significant. Among them, working conditions and location.

Business operates in much the same way. Though rarely clear where lightning will strike, you give yourself a better opportunity by standing on a mountain top.

Product Development

For industries that have highly geographically concentrated manufacturing hubs, it might be worth a plane ticket to show up.

Jimmy and Doug designed their Kickstarter record-breaking carry-on bag, living 30 minutes away from the factory in Vietnam.

This gave them all sorts of advantages bigger competitors didn’t have. It got the factory to take them more seriously than some guys trying to manage it over email.

It reduced communication errors due to the language barrier by actually being able to show them what was going on and what they wanted done on the bag instead of relying on fuzzy pictures.

It reduced the feedback cycle since they didn’t have to wait for the thing to be mailed and handled by customs.

And it let them get the bags exactly how they wanted it and apparently how 1600 other people wanted it too.

Hiring

You can hire world class developers in Vietnam, but you can’t do it on Odesk.

Development talent that would command 6-figure salaries in the U.S. Is available in Eastern Europe and South East Asia, but only if you’re willing to show up.

Steven Moody, a Marketo consultant, has built a development team in Vietnam that lets him do software projects and develop software products for his customers. That’s not something any U.S. based marketing consultant could afford to build into their business model..

As much as trust and context play a role in sales, they play a bigger role in hiring and managing. If you want to get the best talent for the best value, why not show up?

Mobility as Competitive Advantage

Makers vs Managers Continents

Venture capitalist Paul Graham, advises entrepreneurial maker types to create a maker’s schedule and manager’s schedule.

I find one meeting can sometimes affect a whole day. A meeting commonly blows at least half a day, by breaking up a morning or afternoon. But in addition there’s sometimes a cascading effect. If I know the afternoon is going to be broken up, I’m slightly less likely to start something ambitious in the morning. I know this may sound oversensitive, but if you’re a maker, think of your own case. Don’t your spirits rise at the thought of having an entire day free to work, with no appointments at all? Well, that means your spirits are correspondingly depressed when you don’t. And ambitious projects are by definition close to the limits of your capacity. A small decrease in morale is enough to kill them off.

I find that I need at least 3 hours and prefer 5-6 hours to do anything substantial from a maker perspective, but to Graham’s point, it’s bloody hard to block out a 6 hour chunk of your day. Saturdays are great, but that’s 1 day a week.

It’s really easy to block out 6 hours when you’re timezone is off. Good luck scheduling meetings with me while you’re sleeping!

Jason Fried and David Heinemeier Hansson, used this strategy to build Basecamp, now a 40 person company, and advocate for it in their book Rework as one of the advantages of remote work. Because DHH lived in Europe and Fried was in the US, they only overlapped for 3 or 4 hours a day leaving each of them to work alone for the remaining time.

I typically do this in Asia, using my morning and early afternoons to work on maker’s work while the US sleeps and late afternoons and evening to do manager’s work when the U.S. is awake.

Location Layering

What’s starting to arise is location layering, as a way to build the upside from the Power Law of Locations and Power of Law of Interactions into your business.

A web development company that hires project managers in the rural midwest, developers and designers in Southeast Asia, designers in Eastern Europe and then sells into premium markets like NYC, Boston, LA and San Francisco gets advantages at every step of the process.

Single moms in the rural Midwest often have trouble getting jobs because of local conditions but often make great project managers since they’re used to organizing everything for their kids.

Developers and designers in Southeast Asia and Eastern Europe can be hired at more competitive prices than western based ones. As a bonus, the timezone offset often leads to very happy clients. A request made late in the day in the U.S. can be handled overnight and working perfectly first thing in the morning.

High-end markets on the East and West coasts of the U.S. living in the location-is-still-highly-relevant world fully are used to bearing higher prices.

The CEO spends part of the year in Asia building out and training a fulfillment team of designers and developers then part of the year in the U.S. doing sales and hiring project managers.

Some people may shrug this off as “just outsourcing and arbitrage” but if you don’t have expertise in each of those domains, it can take years to build them up.

Toptal, a platform for hiring developers, was built as the founders traveled around the world to build the product and recruit developers.

They used travel as a way to recruit developers to their platform by meeting them in person and also as a way to inform the direction they should take the product. The lower cost of living in places like Eastern Europe let them funnel all their profits back into the company which is now fielding 9-figure valuations.

So it might be worth asking, what are your 10x location levers?

Last Updated on July 30, 2019 by Taylor Pearson