Three Ways to Get Rich: Volume, Scarcity, and Risk
In the year 2016, we are all entrepreneurs. Each one of us is constantly selling our good and services, whether we are a sole proprietor or work for a multi-national corporation. Either you sell to many customers, you sell to a few customers, or you sell to one customer (your employer) that has an exclusive rights contract or at least demands most of your production resources and provides the majority of your revenues. If you are like most people and want to get rich off of your products or services you have exactly three strategies for doing so: sell a lot of it, sell what no one else is selling, or bear risks other people won’t.
Sell a lot
You don’t have to take risks or sell something scarce. You can sell bottles of Coca-Cola or brick-packed Mexican schwag or mow lawns or blog about politics. If there’s a lot of other people selling the same thing you are, you better find a way to sell a lot more if it. Either out-hustle, out-advertise, or out-price your competitors… or you goin’ out of business.
Sell what no one else is selling
Scarcity. Now it’s getting interesting. Be like the famous quote about the Grateful Dead, “They’re not the best in the world at what they do, they’re the only ones who do what they do”. When no one else is selling it, you don’t have to advertise, you don’t have to offer discounted pricing, you don’t have to prove you’re different or better. The people who want what you have will find you and pay you. Being the only one is the best. But even if you do something many other people do, being truly excellent (top 1%) will always be scarce. So if you can’t be unique, be great.
Take risks others won’t
A fundamental principle of finance is that whoever bears the risk gets to charge a premium for incurring that risk. If you have nothing to lose and I could lose everything on a job or an investment, I get to charge more for it. If you want to be my only customer for the next 12 months and have me risk all of my income on you, you’re paying more. If you want me to come to your house and protect you from the Cartel boss you short-changed, it’s gonna cost ya. These are serious risks and I’m going to get paid like it. One way to benefit here is to mitigate the risks in ways other people can’t — having a unique knowledge or a unique set of skills can give you an edge. Playing the stock market is risky business for Joe Schmoe, but Warren Buffett can turns pennies into millions because he can navigate the risks most people cannot. Trying to rescue your daughter from the hands of an Albanian human trafficking organization is a suicide mission for most, for Liam Neeson it’s another day at the office.
Be abundant, be scarce, or take risks — which strategy do you use?