Wynn-ing Ways Email 4 of 45 anti-fragile

In this episode, I want to draw from the work of Nassim Taleb.

Before diving into your blueprint, I would like you to consider if my thoughts about business durability are important to you. If they are, you’ll want to incorporate Taleb’s ideas into your plan.

Nassim Taleb is a thought leader that has written several books.

His first concept is the black swan event. These are unforeseen events that cause havoc. There is no way to plan for them because we are too biased and limited in our ignorance to have any foresight.

COVID-19 was not a black swan event because similar events in the past (SARS) showed the economy’s fragility to an epidemic.

If you watched the Dalio- Freedman video, I shared from the Milken Summit. You’ll know why I say that it wasn’t a Black Swan event.

How can you prepare your business for the next cataclysm?

And there will be one

A Turkey is oblivious to the cataclysm of Thanksgiving.

Everything is fine until November; then it isn’t.

You’re not oblivious; either you already know how fragile your business is, or I just popped that bubble.

When your business is anti-fragile, it adapts and performs better when put under stress. Cataclysms become moments of great opportunity.

Authors occasionally contemplate the horrors of kindle unlimited lowering royalties or a litany of other boogie men that will harm their business.

Most authors either rationalize away the potential or ignore it.

Sure, having an email list is a helpful tool to contact customers, but that isn’t an anti-fragile business.

We’re looking for something beyond a mad scramble when something unforeseen happens. A business that readers rush to at the next great epoch change.

The Burgess Shale shows us it doesn’t matter how well adapted a particular species was to the current environment. When the cataclysm came, a large portion didn’t survive.

Stephen Jay Gould believed if we could rewind the tape of time and let it replay, different life would emerge from the Cambrian explosion solely because of luck.

I know few authors who have active strategies for what they would do if they lost 30% of their business.

They don’t even have a nest egg in place to get them through a significant downtime. One month of missed royalties would be enough to sink them.

They are too focused on fast growth and the latest fad to get visibility than what needs to be done today to prepare for future uncertainty.

When people say things like the industry needs to flush out all these authors, that shouldn’t be in the market. Of course, they don’t think when the mudslide comes that they will be buried as well.

What if you were to build a completely different business? One that didn’t focus on fragile features.

When your frantic because a few ads stop converting, your business is fragile.

Imagine author business systems are the complex organisms coming out of the primordial ooze of the golden age of content creation.

Like the Cambrian explosion, many of these organisms are identical, abundant, maybe even predatory. Will they survive into the next epoch descendants or become mineral ghosts captured in stone of a bygone age?

Creationism Versus Evolution

This isn’t about religion

Instead, this is how you, as your publishing company’s supreme being, designing your business.

Are you going to let influences from the environment force adaption, or are you prepared to be deliberate in its creation?

What type of organism do we want, a vampire bat sucking on rank or a cumulative advantage producing herd?

I’m willing to bet one that creates cumulative advantage.

We don’t want to chase rank or cumulative advantage.

We seek it, but it can’t be the only goal of our business system.

Our higher-order is customer delight and investor needs.

You’ll see later this also aligns with the most important relationship in all of publishing. One that without its existence, the entire industry will collapse.

The focus on reader delight and investor needs will guide our evolution. Still, we also want an organism so adaptable that those cataclysmic events that cause mass extinctions guide it to perform differently or adapt uncommonly. We want your business to be anti-fragile.

The anti-fragile trap

The specific quest is to identify the “why” of the cataclysm.

It’s like the Charlie Munger quote, “All I want to know is where I die, so I never go there.”

If we know the how or where, we can prevent the catastrophe.

Wrong.

That is the core tenant of Taleb’s Black Swan. You can’t specifically prepare because when it happens, it was unforeseen.

The aim is to design a system that can adapt to the unforeseen. A system that turns extinction to not just surviving but thriving.

Remember, a few emails ago, I included the link to Ray Dalio’s economic cycles video? Outside of black swan events, there are business cycles that will affect your business. Here again, most business gurus focused on aspiration talk only of goals an upward trajectory. Instead, build a business that sails the open waters of the economy. An ocean that has ups and downs.

Here is a thought experiment for you.

2021 will be some tough economic times for some authors. Will this be your worse economic downturn in your writing career? Maybe, but it won’t be your last. The average between recessions is 4.7 years. If you write for the next thirty years, you should expect to go through at least six.

In 2008, Warren Buffett had extraordinary investment opportunities. While others were trying to keep their heads above water, he could take advantage of the downturn. In fact, people called him for help, not the other way around. He could dictate exceptional terms to the likes of Goldman Sachs because he was ready for a downturn (BTW 2008 was not a black swan).

Pro poker players know having resources in reserve to strike when others can’t is a leveraging cumulative advantage method. Do you want to learn how to build a business with advantage accumulation and leverage designed at the cellular level?

If your head isn’t already nodding, it will as you read the following statements:

While I don’t know how the publishing market will change, I’m confident it will be very different in the future.

While I don’t know when it will change, I’m confident the rate of change will increase.

If those two statements didn’t hit home, unsubscribe now because what I’ll be covering is how to build a publishing business that is prepared for delivering customer delight and meeting investor needs in a future where there are unexpected changes that happen more often.

Let’s put things into context.

There is no certainty that Facebook will be a reliable place to search for readers in ten years.

There is no guarantee that Amazon will continue to dominate book sales.

It won’t continue to be the biggest market for books that will most likely be in China, and the communist party will make sure it is state-controlled.

As the culture wars amplify and annoy most people, the stock of attention won’t collect on these abused commons.

As I’ve been writing these emails (December 2020), forty-eight States, The US Government, and the EU have all agreed that big tech needs to be investigated for predatory practices and collusion. They will distract those companies at a minimum with ongoing litigation. They could be broken up. There will be a change.

Why Do We Breathe?

You can go a long time without food or water, but you couldn’t make it through the length of this email without breathing.

The intelligence and processes necessary for your cellular metabolism aren’t even part of your conscious thought. It just happens—a deeper systemic intelligence.

You need to breathe to bring in the oxygen for the Krebs Cycle.

This is the chemical process used by life on this planet to turn sugars and fatty acids into energy that our cells can use. This process happens in our cell mitochondria.

One evolutionary theory is that the mitochondria were once a separate single-cell organism, and billions of years ago were enveloped into another organism’s cell wall.

This adaptation was the first step of multicellular organisms using oxidation to produce energy.

In the organism that is your anti-fragile publishing business, we need to focus on the life-sustaining relationship – the reader-writer relationship—the building block of our organism.

I’ve written about this in the past as the symbiotic relationship that the whole biome is constructed. I first explored this subject in Treat Your Writing Like a Business.

In that article, I describe the relationship as similar to a honeybee and a flower how the process of nectar collection facilitates pollination, a necessity for the biome to thrive. This is true.

I would like to amend the concept.

The Reader-Writer relationship is also an endosymbiosis.

What’s that mean?

The reader and the writer’s intimate relationship results in mutual benefit and drives the whole publishing economy. Reader money funds everything.

However, where it is most important is at the micro-level inside an author’s business. This is what sustains us.

Suppose we can make sure that we are always promoting the conditions for the relationship to thrive. In that case, it will produce the energy (money) to keep our publishing organism alive regardless of the environment.

We need to ensure that we optimize the business equivalent of a Krebs Cycle by systematizing your reader delight cycle.

Therefore, at the micro and macro-level, we seek to facilitate the readers’ well-being, as they are the only cash source outside the investor.

If we don’t facilitate surplus cash, we can’t meet those investor needs. The first being to end the investor as a source of cash for your publishing business.

“Alright, Solari, enough with the metaphor and analogies. How do I do this?”

We are getting into the nitty-gritty in upcoming emails.

I’ll lay my ideas out for how to do this. While the concepts are simple, the work isn’t.

That’s a good thing because those unwilling to do what we will set out to do, get left behind.

Here it is …

You need to be as close as possible to your reader. Not just transactionally, but intimately.

You’re LITERALLY (pun intended) are allowed inside the reader’s head, yet where we focus our efforts is on platforms and funnels.

Establishing a strong personal bond between your character and your reader results in them investing their identity into your brand.

Seth Godin shared in an interview that he cried when Leonard Nimoy died. He had never met him, and much of the connection was to the character Spock.

Even a genius marketer falls for the emotional connection we conjure in our minds with fictional characters.

Have you ever killed a darling?

What was the response?

I digress, and much of the research on this topic of brand and community is in Advantage.

From the business’s perspective, this means we need to build a company that strengthens, multiplies, and moves the reader-writer relationships based on environmental changes and the black swan events life sends our way.

Having a solid mailing list is a good indicator you’re protecting your business, but it doesn’t make your business anti-fragile.

Our path is to be radically traditional and build a system that perpetuates reader delight and a place for the reader to thrive.

Join me in making anti-fragility structural.

While you embed reader delight in our business system, your readers see their identity is tied to your brand and have a worldview that your community is a safe place that provides refuge.

In this scenario, you will be pulled with your readers to where they go in tumultuous times and attract more readers when there is no cataclysm.

I’ll unpack this further in later emails, but I need to discuss the other side of our focus investor needs (that’s you). I am specifically focusing on the ideas of the cash-flow feedback loops you need in your business.

There is an energy transfer (money) cycle, just like the Krebs Cycle, your business’s life force. Below is my attempt to capture this idea visually.

Our objective is to build systems the support this vital cycle. We look to get them to balance, and that will mean choices and tradeoffs. The more money you leave in your business to attract customers, the less there will be investor returns, but let’s get back to survival.

At this point, you have a choose your adventure. If you’re still not profitable, read startup phase. If you’re already profitable, read planning my working capital.

Startup

You’re in the most fragile state as the only source of cash, is you. Do you know how much you’ll need to invest? I put together this tool for authors to figure out how long it will take them to get to break even and how much they will need to invest.

The results can be scary but not knowing is worse. You’re not sticking your head in the sand; you’re sticking it in an oven.

Use the planner this year and understand what it will take in time and money. If the results are uncomfortable, then explore why? Is it you don’t have the cash? Then start saving to do this right. Is it you’re impatient for how long it will take? Join the club. Is it you don’t think it’s worth it to invest that much time and money? Then don’t.

Planning Working Capital

How much money does your business need inside it to operate in 2021? This is the working capital need. As your business grows, more funds need to stay inside it. Running that Krebs Cycle as you plan for 2021, focus on what your investor needs out of the business. If you’re still in early-stage growth, it is only a small return. As you plan, look at your capital through the lens of my sketch. How is each dollar used? Is it perpetuating customers or wealth? Sometimes you choose to spend money on a business consultant to reduce taxes, thereby perpetuating more capital in future cycles. Scrutinize how your business is structured. Does it support these two cycles?

HERE IS THE LINK TO THE PLANNER

Let’s revisit what we just covered.

A publishing business focused on grabbing attention as measured by rank and conversion will not organize or optimize the same way as a publishing business focused on reader delight and investor needs.

Neither is less work, but the difference is the results.

Publishing businesses need to be anti-fragile to survive the unforeseen cataclysms and adapt appropriately to incremental changes. Adaptation to improve reader delight and investor needs will result in different adaptations than a business adapting to conversion and rank.

Systematizing this focus on your business’s “cellular level” and building up from there will align your operations on the two primary goals.

Next week we’ll dive into the blueprint. I promise to get back to the reader delight and  investor needs, but we need to think through documenting the plan. We need to get level set on how to integrate all of this STUFF into the vision you have for your business.

Suppose all you can come away from this season with is a solid foundation on cash flow planning through the use of my capital planner? In that case, you’ll have established structural change to your business that WILL create cumulative advantage.

Don’t believe me? Try it and email me if you now see your business differently?

Email 5 of 45