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Systematic Wealth Chapter 2


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Systematic Wealth Chapter 2

  1. 1. Systematic Wealth Chapter 2 <ul><ul><li>By Peter Nguyen </li></ul></ul><ul><ul><li>CEO & co-founder </li></ul></ul><ul><ul><li>Talentelle </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Workshop creator </li></ul></ul><ul><ul><li> </li></ul></ul>
  2. 2. <ul><li>So my million-dollar question is, How can I create such a business system so I can become rich? </li></ul><ul><li>First of all, you have to understand what a system is. A system is not always visible nor is it always understandable, especially to non-scientist people. But one thing you can bet on is that a system works almost flawlessly. </li></ul><ul><li>Example? </li></ul><ul><li>Your body. It works almost perfectly. For instance, try to spend 24 hours without eating anything. I guarantee that you will feel the urge to grab some food and drink some liquids! </li></ul>
  3. 3. <ul><li>So a system can sense what it needs? </li></ul><ul><li>Yes. Not only that, but it can process what goes into it. For example, you grab a hamburger and eat it. Your body then automatically digests it and breaks it down into proteins and nutrients that are then fed into your system, to give you energy. </li></ul><ul><li>How does this relate to creating wealth systematically? </li></ul><ul><li>Well, you have to create a system that creates value, and that system should be as natural as possible. If your wealth creation system is natural and functions effortlessly, you will become very rich very quickly. </li></ul>
  4. 4. <ul><li>That sounds great, but can you provide a concrete example of a “natural” wealth creation system? </li></ul><ul><li>A natural wealth creation system can be based on: </li></ul><ul><ul><li>Your natural talent (read Strengths Finder 2.0, by Tom Rath or any of the three books written by Marcus Buckingham on the 34 basic talents of human beings) </li></ul></ul><ul><ul><li>Resources that you naturally or habitually have access to </li></ul></ul><ul><ul><li>Technologies or systems that you master or leverage better than anyone else (think of Warren Buffett and the stock market system) </li></ul></ul>
  5. 5. <ul><li>No matter what system you use to create wealth, it will eventually fall on a spectrum with “luck” at one end and “programmed result” at the other end. </li></ul><ul><li>In between, outcomes will depend on a person's effort, abilities and strategies. </li></ul><ul><li>In addition to having a robust system for creating wealth, one also needs to have systems that support the wealth creation system. </li></ul><ul><li>Business people usually talk about “line” functions to refer to value creation systems, and “staff” functions to refer to activities that support the value creation for customers. </li></ul>
  6. 6. <ul><li>Do I need customers first or do I need a value creation system first? </li></ul><ul><li>You need a minimal system to start with, and you definitely need at least ONE customer to serve. </li></ul><ul><li>The customer's needs are incredibly important, because all money flows from a customer's needs. </li></ul><ul><li>Let me repeat that: All money flows from a customer's needs. </li></ul>
  7. 7. <ul><li>Curtis Carlson, in his book Innovation, reinforces that point, saying that the correct innovation process goes from Needs to Approach to Benefits and then Competition. </li></ul><ul><li>Needs : You need to know precisely what is the unmet need that you are trying to fulfill. In the 1950s, the famed economist John K. Galbraith wrote that mass advertising creates wants that people did not know they had, or needs that were not really needs. Today, consumers are smarter so it's important NOT to try to create superficial needs, but to identify and define actual needs. </li></ul>
  8. 8. <ul><li>Next, you have to have a particular approach or method of creating value to fulfill that need. </li></ul><ul><li>Third, you need to list all the benefits of your approach or solution, as well as the costs associated with each benefit. </li></ul><ul><li>Finally, you need to compare your approach to competitors, and state why your approach is superior. </li></ul><ul><li>Anyone who wants to become rich should memorize the above framework for creating value: NABC, or Needs, Approach, Benefits and Competition. </li></ul>
  9. 9. <ul><li>Carlson correctly points out that most entrepreneurs start with their own unique approach, and don't spend enough time analyzing the customer or market needs. Nor do they spend much attention or energy on researching quantitatively the benefits and costs of their products or services, or how they compare vis-a-vis competitors. </li></ul><ul><li>Why is that? </li></ul><ul><li>Perhaps entrepreneurs are too self-centered. Being optimistic is good and certainly goes a long way in motivating a person to launch a business. However, business is also rational, so proper analysis using the NABC framework is essential to success. </li></ul>
  10. 10. <ul><li>But what about Google? They didn't seem to start with people's needs in mind. They were actually wondering for years how to make money... </li></ul><ul><li>That's correct. It took them a while to figure out how to make money with search services. Today, AdSense is a big money-maker. However, the people behind Google are technological geniuses, so it might not be a good idea to model one's business after them. </li></ul><ul><li>But there must be something we can learn from Google, no? </li></ul><ul><li>Yes. Leverage the Internet, whatever you're doing. Be online. Think global and act global. </li></ul>
  11. 11. <ul><li>Another thing you can learn from Google and Amazon is to expose all your products and services to the world, so as to keep improving them. The customer is always right when it comes to value. In other words, value is only value when the customer says it's value. </li></ul><ul><li>That's an important aspect of systematic wealth: feedback. Don't be afraid of feedback and criticisms. They help you to correct your strategic trajectory and improve your products, services and solutions. </li></ul>
  12. 12. <ul><li>So concretely, what can I do right now to begin the process of creating a wealth creation system? </li></ul><ul><li>You should understand that Performance = Potential – Interference. </li></ul><ul><li>In other words, how much value you create (hence, how much money you get) equals your potential minus all the interference or constraints that work against your system. </li></ul><ul><li>Take any sport, for instance. The defense of the opposing team is “interference.” Without that interference, you would be able to score an unlimited number of points. </li></ul>
  13. 13. <ul><li>What about potential? </li></ul><ul><li>Your potential (or the maximum value or wealth that you can create) depends on the factors mentioned on slide 4, namely your talent, the technologies you master, the resources you possess or have access to, etc. </li></ul><ul><li>For employees, one source of “interference” is the fact that they have only one client (or employer). </li></ul><ul><li>Free agents do better since they can actually have several clients. However, time is their source of interference since they can only work a certain number of hours per day. </li></ul>
  14. 14. <ul><li>Next, we have entrepreneurs. These are people who build systems of value creation and then hire labour to operate those systems (which includes the means of production that economists talk about, such as land, capital and equipment). </li></ul><ul><li>Finally, we have investors, who are not constrained like entrepreneurs since they can leverage the wealth creation capability of MANY companies and not just one. </li></ul><ul><li>Can an entrepreneur also leverage many companies? </li></ul><ul><li>Yes. For instance, through franchising or licensing of intellectual property (IP). </li></ul>
  15. 15. <ul><li>We'll talk more about franchising and licensing in a future chapter. Right now, it's important to remember that to create systematic wealth, you need to identify your: </li></ul><ul><ul><li>P otential </li></ul></ul><ul><ul><li>Interference </li></ul></ul><ul><li>It's important to note that “potential” can apply to a market or a product or a capability that you have (also called a core competence). </li></ul><ul><li>Indeed, the equation wealth = potential – interference can apply at different and various levels of analysis: business model, profession, career, industries, etc. </li></ul>
  16. 16. <ul><li>Let's say I want to become a millionaire. What would be my sources of interference? </li></ul><ul><li>The first interference is your mind. To be more precise, the way you think could actually PREVENT you from becoming rich. This is why Jim Rohn says that you have to change your philosophy before you can become wealthy. </li></ul><ul><li>What does he mean by that? </li></ul><ul><li>Let me put it this way: “The man who thinks that 10 million dollars is a lot of money, is not the kind of man who can make that kind of money.” </li></ul><ul><li>In other words, what is possible to a man is first determined by what he BELIEVES is possible. </li></ul>
  17. 17. <ul><li>This belief can be shaped by actual personal experience, or it can simply be a new belief that you adopt. </li></ul><ul><li>This remind me of a joke. Bob has a tooth ache and goes to see the dentist to have his tooth removed. So he asks: “So doc, how much is this going to cost me?” </li></ul><ul><li>The dentist replies: “It'll cost $200.” </li></ul><ul><li>“ And how long will it take?” </li></ul><ul><li>“ About 2 minutes.” </li></ul><ul><li>Bob is shocked. “What?! You're charging me $200 for 2 minutes?! Isn't that ridiculous?!” </li></ul>
  18. 18. <ul><li>The dentist replies: “Well, Bob, if that's what's bothering you, I can take as long as you like!” </li></ul><ul><li>The lesson is that some people will spend their entire lives NOT believing that they were born to create immense wealth. Others, especially younger people aged 18 to 30, can adopt a can-do attitude and decide, once and for all, that they will not accept anything less than a net income of a million dollars per year. </li></ul><ul><li>Napoleon Hill wrote, “What a man can conceive, he can achieve.” </li></ul><ul><li>My point is that to construct a wealth creation system in your life, you first have to resolve certain self-esteem issues in your mind. </li></ul>
  19. 19. <ul><li>If you don't believe you are worth a million dollars, then no matter how brilliant your system is, you will eventually lose all your money. </li></ul><ul><li>Read the book Secrets of the Millionaire Mind by Harv T. Eker to learn more about how to combat this psychological disease of not believing in oneself. </li></ul><ul><li>For the remainder of this book, I'm going to assume that you believe in yourself and that you have no problem whatsoever with the idea of having a net income of a million dollars per year. </li></ul>
  20. 20. <ul><li>To read the following chapters of this book, titled “Systematic Wealth”, please write to me at [email_address] while mentioning “chapter 3” in your email. </li></ul><ul><li>Good luck in all your endeavours! </li></ul>