Monthly Archives: November 2008

Are You A Hedgehog Or A Fox?

What’s with this idea that having tons of “projects” is a good thing? Although it may be true that being a shareholder in several businesses that run without your involvement profitably is an ideal situation to be in, but to many aspiring entrepreneurs seem to think having lots of projects for the sake of having projects is a good thing.  Most of the time entrepreneurs try to do way too much.  And the great gift we all have to see an opportunity and go for it, becomes our Achilles’ heel because we then try to chase after all of them.  

Success is not determined by the amount of projects you have going on.  Even though it might sound cool to have several things going at once, to me it sounds amateur.  But not lets just take what I have to say, let’s take a look from Jim Collin’s point of view as well, the author of Good To Great, a book that took 20 years to study the greatest companies in America and what they have done to outperform all of their competitors exponentially over the century.  One of the concepts he talks about, which I absolutely love, is the Hedgehog concept, which I’d like to share with you:

The fox is a cunning creature, able to devise a myriad of complex strategies for sneak attacks upon the hedgehog. Day in and day out, the fox circles around the hedgehog’s den, waiting for the perfect moment to pounce. Fast, sleek, beautiful, fleet of foot, and crafty—the fox looks like the sure winner. The hedgehog, on the other hand, is a dowdier creature, looking like a genetic mix-up between a porcupine and a small armadillo. He waddles along, going about his simple day, searching for lunch and taking care of his home.

The fox waits in cunning silence at the juncture in the trail. The hedgehog, minding his own business, wanders right into the path of the fox. “Aha, I’ve got you now!” thinks the fox. He leaps out, bounding across the ground, lightning fast. The little hedgehog, sensing danger, looks up and thinks, “Here we go again. Will he ever learn?” Rolling up into a perfect little ball, the hedgehog becomes a sphere of sharp spikes, pointing outward in all directions. The fox, bounding toward his prey, sees the hedgehog defense and calls off the attack. Retreating back to the forest, the fox begins to calculate a new line of attack. Each day, some version of this battle between the hedgehog and the fox takes place, and despite the greater cunning of the fox, the hedgehog always wins.

Berlin extrapolated from this little parable to divide people into two basic groups: foxes and hedgehogs. Foxes pursue many ends at the same time and see the world in all its complexity. They are “scattered or diffused, moving on many levels,” says Berlin, never integrating their thinking into one overall concept or unifying vision. Hedgehogs, on the other hand, simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything. It doesn’t matter how complex the world, a hedgehog reduces all challenges and dilemmas to simple—indeed almost simplistic—hedgehog ideas. For a hedgehog, anything that does not somehow relate to the hedgehog idea holds no relevance.

Princeton professor Marvin Bressler pointed out the power of the hedgehog during one of our long conversations: “You want to know what separates those who make the biggest impact from all the others who are just as smart? They’re hedgehogs.” Freud and the unconscious, Darwin and natural selection, Marx and class struggle, Einstein and relativity, Adam Smith and division of labor—they were all hedgehogs. They took a complex world and simplified it. “Those who leave the biggest footprints,” said Bressler, “have thousands calling after them, ‘Good idea, but you went too far!’ ”3

To be clear, hedgehogs are not stupid. Quite the contrary. They understand that the essence of profound insight is simplicity. What could be more simple than e = mc2? What could be simpler than the idea of the unconscious, organized into an id, ego, and superego? What could be more elegant than Adam Smith’s pin factory and “invisible hand?” No, the hedgehogs aren’t simpletons; they have a piercing insight that allows them to see through complexity and discern underlying patterns. Hedgehogs see what is essential, and ignore the rest.”

So are you a hedgehog or a fox?

I try to be a hedgehog.  And this is how it relates to my life and business, so you can take this concept and if you like it you can apply it to your own life. 

Our hedgehog concept is simply this, we need to become the absolute best software provider in the ppc affiliate tracking space.  Anything other than that matters nothing to me, real-estate is not important any more, or making money online in general, or starting another project, or even personal affiliate marketing for that matter.  I will only do whatever it is that helps us become the leader in the space, anything other than that is not important whatsoever.  And until and only after we do become the best at that, then we will maybe move on and try to dominate another niche.  It may take 10 years to become the best in the space, that’s ok, because we’d rather be the best in the space than 2nd place somewhere else. 

If we are unable to become 1st place in whatever we do, we won’t do it.  We were thinking about doing some large high volume email marketing with over 15-25+ million email addresses with rev-share deals with affiliate networks.  We could have made a significant income, once email gets going it isn’t uncommon to hear mailers make anywhere around $5,000-$15,000 or more in a drop.   We could have done this. 

We also could have done mass internal search campaigns and utilized our technology only in-house and made a fortune which some other super affiliates have decided to do.  We’ve shown almost half a dozen individuals how to earn over $10,000/day through affiliate marketing, and we could have done this for ourselves as well, but we did not.  We could have scaled out our affiliate marketing business to over $50,000/day or more, and although you think we may be bluffing we have friends who do that and more, even past the $100,000/day barrier on some rare occasions.  But we did not, and I have not worked on any personal campaigns for over 6 months because doing it does not help us become the best software provider in the ppc affiliate tracking space.  We have to give up the opportunities to chase one opportunity, and do something we can really become the best at.

Whatever it is your going to do, do it, focus on it, and really make a big impact when you do it.  If we rated everything we were able to do on a 1-10 efficiency scale, it would be fair to say that most things we can do at about rating of 6 most people wouldn’t want to see.  But things that we could do at a 9 or even 10 rating, people would pay to see.  Do something you can really be proud of, not to be ok at several things, be the best at one thing, once you are the best at that, then move onto something else. 

Don’t focus on your weaknesses, your weak at them, focus on your strengths.  Don’t waste time working on a small side project, when you could be building one really big project and make a huge impact with it.    Stop getting distracted by all the opportunities out there, and chase after the one opportunity that you can do the best.    Distractions are the killers of dreams….

Here is a real-life example of this at work.  My friend Rob is one of the sharpest people I’ve ever met, he is one of the most successful entrepreneurs that I personally know in our age group.  Here is an example of someone who has spent the last 6 years working full-time on his businesses.  Although he started with one, web-hosting and built his customer base, and started acquiring other hosts.  After some time he brought on a partner to manage operations so didn’t ‘have’ to be there every day working on the company

Then he went to build a voip business, and spent a large amount of his time doing that when I first met him.  He has built some technology in house, and after over a year has now hired a full time president of the company to take over, he pays him salary and the manager now runs the entire business.  Rob is now able to work on other projects, because he has built them correctly and then he can move on.  He is now starting a new business with my other good friend and starting to do the same thing. Build it, and then put people in place to manage them.

See the point is this, when he goes and does something, it doesn’t do it ‘half-ass’ he goes in puts in his 10 hours a day over 10 months in a row and goes to work, after he builds it, then and only then he puts someone in place to manage his business.  He isn’t working on 100 things at once; he does things, actually does them, and then puts people in place to manage the projects.  That is the model you want to follow, Rob has done it extremely well and he continues to do it up until this day.  There are several people that rob has manage his projects now.  

Take his story and then compare it with a new entrepreneur, trying to “do several projects at the same time.”  The inexperienced entrepreneur tries to do everything Rob did at once, while Rob did one at a time, then put people in place to manage them.  The inexperienced entrepreneur trying to do them all is unable to focus his time to really build one project huge, he is to scattered, like the fox trying to do to many things.  They do all their businesses half-ass, and the result is a bunch of half-ass projects, when they should have just focused on one and built it.   The inexperienced entrepreneurs excuse is, “having multiple streams of income is good,” even though none of the projects provide any streams of income at all.  If anything they provide streams of distractions and lost progress that could have been made.  In this scenario the inexperienced entrepreneur is the fox, and rob was the hedgehog.

If you want to learn more about this concept read the book by Jim Collins, Good To Great.  Are you a hedgehog or a fox?  How many projects do you have going now?  If you have 3 or more, you are most likely a fox. 

Why Building a Fortune is better than Building Passive Income

I used to believe that building passive income was the absolute best way to achieve financial independence.  This idea of having passive income was so attractive to me earlier on; I told myself that I’d never work on any project that doesn’t pay me for the rest of my life.   And that has been the path I’ve taken for the last three years.

A lot of time was spent on building passive income, some of our projects succeeded, many of the them failed.  Although at this point I still have some stuff I worked on the past that continues to pay me until this day, but had I do it all over again, I would not have focused on passive income.  

If someone is to build an empire of Adsense Sites, or long-term ppc campaigns and or start purchasing lots of rental property for instance (what I’ve tried to do) then you will end up with your monthly residual income.  And you will be financially free, able to retire after a few years of building your nest egg of passive investments.   

After joining the affiliate industry, which is for lack of better words, crazy, I’ve begin to think differently.  It is not uncommon for someone to be able to generate a large amount of profit in a relatively short period of time and although what they have produced isn’t life-time residuals, they will come out ahead within a short period of time.  

So much so, that the capital they were able to raise in 3-5 months, was now enough to invest in other projects. So I started seeing things a little differently, if you are able to generate $100,000 to $1,000,000 within a short time, you could then easily invest in passive income sources easier anyways.  And you’d be moving a lot faster than if you tried to build passive income from the get-co.  Because you’d now have capital to move even faster.  

Which is better, $20,000/month net passive income? Or $1,000,000 in your bank account?

Besides. Who needs passive income if you have $50,000,000 in your bank account? You don’t need passive income at all, you’d have a fortune at that point.  And I bet building the fortune was funner than trying to build a bunch of small little projects and slightly increasing your monthly net income over the course of a few years.  

Again, passive income is still awesome and is one way to be financially free,  Although any more, we don’t have time to waste.  We’re not here to build a small amount of monthly income, we want to do big projects with high-impact and build a fortune and a large amount of prosperity.  

I have been able to free myself from focusing solely on passive income projects now, and now we focus on building a fortune.  I’d rather sell a company for $50 million than trying to build sites every-day, or buying 100 houses and renting them out.  It is personally more exciting for me, and passive income is a sure-fire bet, but is is slow, and not that exciting.  

Just keep this in mind.  Building passive income is extremely slow, although building a fortune can be done quicker than you might ever imagined… think about it. 

Passive Income, or a YouTube… a fortune (thats the difference…)

Will be in LA this weekend, let’s meetup.

Hey everyone we’ll be driving down from San Francisco to Los Angeles this weekend, for our LA Meetup202 event to talk with local advertisers and some other software companies.  If anyone is in the area and wants to get together, feel free top stop by our meetup and say hello.  Look forwarding to seeing everyone there.