In the last email, I ended with your need to diversify to create and protect your wealth.
I also stated that if you’re lucky, you’ll always be burdened with your publishing business as being your largest asset.
Even with diversification, your ability to create cash through making up stories should continue to exceed the growth of your diversified assets.
If it doesn’t, then the rational decision of your inner investor would be to reallocate capital to those performing best.
The thing is, the publishing businesses can have crazy returns while remaining flawed and fragile.
Many of today’s hot business models are flawed and fragile.
It’s hard for us to see these flaws because of the valuations and the hype these companies get.
Uber, Airbnb, Facebook are all fragile—even Amazon.
Frankly, it boils down to what you create. You may argue that these companies create value.
Now we’re going to argue.
Most are market-makers—friction between the value creator and the consumer. Friction can be eliminated by both incremental improvement and Schumpeter’s creative destruction.
Amazon adds value, but not in the act of buying and selling, but only in the most profitable division Amazon Web Services. There they have created cash-flowing assets.
The basis of a durable business is assets that produce cash flows.
Copyrighted assets are incredibly profitable given the monopoly power you’re given through the protections in the Constitution.
While the assets are durable, what may not be is the publishing business that exploits those assets.
The average lifespan of a business has shrunk from sixty years to ten. In the time I’ve been around publishing, I’ve observed some shooting stars fizzle.
I’m watching a few right now.
In just about every case, career success was entirely under the author’s control. They steered the plane into the mountain. The mountain didn’t suddenly jump in front of the aircraft.
What about you? How do you keep from becoming another cautionary tale?
Thinking it won’t happen to you is a mistake. Preparing for change and building in adaptation—that’s what will make your business antifragile.
Because here’s the cold, hard truth:
Most of life is the unplanned.
How much of your life went according to your plans?
Maybe I’m sensitive to this, given the fact that my son was randomly hit by a stray bullet. He’s fine, but those types of scares indelibly remind you how little of life is under your control.
Take time right now to think through how many decades you’ve been on this planet and what you planned to have happen versus what actually happened.
When looking back over my own time so far, much of what happened was outside my plans. Certainly, my planning and goals were essential tools for guiding my life as best I could, but shit happens.
Most of life is unpredictable.
In preparation to write this email, I reflected on some of my predictions.
I can remember twenty years ago when my vision for the future was just a bigger version of my business. Sure, it was audacious in its scope, but it was just growing what I had.
More of the same, but super-sized.
Life dealt me different cards, and choice took me on a journey I never could have predicted. It ended up better than I planned.
I’m in industries that didn’t exist thirty years ago. I couldn’t have predicted my place in those nonexistent markets.
Planning, Preparation, Prediction, and Optionality
Let’s talk about preparation. It’s planning for the unforeseen and unplanned.
You may think that preppers are odd ducks, folks constantly worried about some future cataclysm. The act of being prepared becomes an obsession as the prepper gets hyper-focused on what’s in the car, what to carry, and how much rice is in the pantry.
Funny, huh?
It is—until the grocery stores run out of toilet paper. Then you scramble online to find some and end up subscribing to a prepper YouTube channel. Two videos in, you’ll discover that prepping is not just about saving your family during highly unlikely events, but also making your life better now.
How does that pertain to your business?
What if, rather than predicting and planning for a particular outcome, we prepared for positive outcomes—not focusing on one specific goal but seeding the future with positive possibilities?
This preparation will manifest in two ways:
1. Preparing for the downturns
All the talk is about hitting the goal of being a six-figure author. Only here do we discuss surviving the four to six economic downturns you’ll face as a business owner.
For a business, survival boils down to cash management. You having the reserves to get you through down cycles. Planning can be seen in a new light. What contingencies do you have in place when things don’t go according to plan? Because there’s a higher probability that life will send you a curve ball or two.
But if you have those contingencies in place, you can change bad into good. When your competition is cash-strapped, you can spend. My clients and many of you who subscribed to this email followed my lead and got PPP grants and EID loans. That cash got you through tough times, or even turned a global pandemic into a growth period by using cheap capital to grow your business.
BOOM! That’s scooping up resources in this current round to give you massive leverage in future rounds.
Think of preparing as dynamic planning. Instead of being focused on one particular outcome, come up with a plan to manage should a set of conditions present themselves.
Just like your decision-making, there should be contingencies for various outcomes. This runs counter to the myth of the heroic CEO. What do I mean?
Today, the entrepreneur is told to hustle and make their goals a reality. You, as the CEO, should be able to set a plan and, through grit and determination, make it happen. The obstacles that come your way? It’s over, under, around, or through. If not, you pivot. But that’s all start-up speak to say, “My first plan sucked, so I came up with another.”
No pivoting. Instead, prepare.
There is a multitude of outcomes; the majority are determined solely by how you react to forces outside of your control.
Treating the CEO’s original plan as gospel is an attitude full of hubris—one that leads to a holy smackdown. The idea that you or I am so clever that we know what’s best for your business ten years from now is laughable. You’re smart enough to plan for possibilities rather than specific outcomes.
When the pandemic hit, I stress tested all of my client businesses. I took their business model and simulated what a 20%, 30%, and 50% drop in sales would look like. That prepared us to see how bad it could get and to put in place contingencies.
We may now be facing a downturn as readers seek to get out of their homes and revenge travel. Will they have time to read along the way? That remains to be seen.
Can your business survive such a downturn? Maybe—if you follow the indicators that guide you to invest or conserve funds based on unforeseen events and inevitable business cycles, rather than throwing everything you’ve got at your publishing goals.
Sometimes goals seem intelligent, but are they helping or only making your business more fragile?
One goal some authors have is to enable their husbands to retire. It’s a significant accomplishment, but in doing so, did you just make your life more fragile?
What are you doing to deal with the unforeseen if your household income is entirely tied to the publishing business?
You might say to yourself now, “I need to see that estate attorney.”
Sure, that’s helpful for IP and tax planning, but does it mean that your publishing business will generate income for future generations?
Will it continue if your spouse had to run it?
Most author spouses don’t know the password to get into a KDP account, let alone what would need to be done to keep the IP cash flowing.
A contingency plan that makes sense is starting with simple things like writing down passwords and who they could get help from. These are simple steps to making your business antifragile.
Once you take care of some of the basics of encountering the unplanned, you can look at the probabilities of outcomes and plan for those.
Our author wave model is essential. Not that we look to get the timing right, but that we plan what to do in up and down cycles. How do you react in an A phase versus a B or D phase?
Having a plan for the ups and the downs is another way to accumulate advantage. Downturns are inevitable, and having cash reserves to act during the downturn allows you to get the most of your assets.
2. Preparing the future for better optionality
Here is another advanced way of thinking. What if today was about planting the trees of prosperity?
Design your day-to-day schedule to increase the optionality in the future. Rather than following the one vision—go hard or go home—look to increase the probability of positive outcomes. And not just ones you can imagine, but all possible positive outcomes.
One trait I’m particularly proud of is my capacity to build networks. When I meet people, I look to understand how I can help them or how they may be helped or help someone I already know. This can take years to manifest, but when the pieces come together, value is created.
I now understand this is one way I create Future Positive Optionality (FPO). FPO isn’t some woo-woo manifestation, but laying the foundation so your business and mindset are prepared and open to see the ways that yield the best results.
Furthermore, by creating FPO, you’re connecting to the positive options of others and increasing the probability that you’ll be a part of something great.
This is a far different mindset from trying to make a million dollars writing books. That’s finite and fragile. Designing a business around your content that looks to produce, promote, and participate in positive outcomes is infinite and adaptable.
Next week I’m going to introduce you to what I have planned for next season. More than just introducing you to the content, it is an example of how you can think about delivering your content.
As we did last year, you’ll need to indicate interest in my newsletter. If you’re interested, raise your hand here. This way, you will get access to the next season.
Now, go build some FPO!
Joe