Book notes represent personal notes on the books that I have read and which I consider are worth mentioning.

The main purpose is to have a reminder of the topics which are covered in the book. Let’s face it, after reading a book, I remember only the things that spark my attention the most. Everything else gets lost over time. Creating notes is a way to :

• organize my thoughts,
• have more things that stick permanently in my mind,
• have a place where I can reconnect with the things that I have read.

Notes can also serve as a recommendation to anyone who is thinking about reading this book.

If the book review is taken from the 3rd party source, I will always include the original link, together with the complete copy of the review.

I want to thank Goran Savic who gave me a great idea on how I can show the book grade. You can check Goran’s blog on here.

Thoughts about the book:

This book is a must read for everyone.

To be honest when I started reading this book I didn’t know what to expect. The book title does not provide any clues on what the book is about. However, by the time I have finished reading the book I regretted that I didn’t read it earlier in my career.

This books is about financial planning. Most of the working people do not spend nearly enough time thinking about financial planning, creating the plan and sticking to it. I know that I wasn’t before I started reading this book.

For me the highlight of the book is how the author MJ DeMarco talks about 3 different financial plans:

• The Sidewalk – spend more than you have, live on loan, bei poor when you are old
• The Slowlane – live in frugality today so you can enjoy being wealthy when you are old
• The Fastlane – work on important thing today, work for yourself, work hard for 5 years and be wealthy while you are young

The system I live in, system which is responsible for my education, is the system that teaches everyone that the Slowlane is the way to go. Geta steady job. Don’t buy what you don’t need. Save as much as you can. In the end when you retire as 75 year old man you can enjoy the life. Then you can do whatever you want.

I never gave this plan too much thought. But, after reading this book, I see how that plan sound silly. I can hardly believe that I was following that plan to the letter. Not anymore.

Link to the book:

The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime

Book Review source:

https://booknotes.quora.com/Notes-on-Millionaire-Fastlane-by-DeMarco

Notes on Millionaire Fastlane by DeMarco

LEO POLOVETS

Despite its incredibly cheesy title, The Millionaire Fastlane is awesome. It’s a book that everyone should read. It offers a very compelling alternative to the “Get Rich Slowly” philosophy.

Here are some detailed notes and highlights from the book:

• Observation #1: If you want to keep getting what you’ve been getting, keep doing what you’ve been doing. Corollary: If you’re not getting wealthy, then STOP doing what you’ve been doing.
• Observation #2: People who drive Lamborghinis and jetset around the world did not get there because they “Got Rich Slowly” by investing in mutual funds, clipping coupons, and maxing out their 401Ks. Those techniques are not an effective road to wealth.
• The “Get Rich Slowly” approach is faulty because it takes a lifetime of work, it’s dependent on getting lucky with your investments, and even if you do get rich, you’ll be too old to enjoy it.
• Except for very few people (i.e. lottery winners), wealth is not an event but a process. People focus on events like selling their company or winning a big contract, but the real story is not the events but the processes and hard work that made those events more likely. If you skip the process, you won’t get the events.
• People come up with all kinds of reasons for why they “deserve” to be wealthy: they come from a prestigious background, they have a great business plan, they think positively, they are “doing what they love”, and so on. None of that stuff matters. Becoming wealthy is not about having the right prerequisites; it’s about taking smart risks, putting in the hours, and not quitting.
• There are three financial roads:
  • The Sidewalk — living well today at the expense of having more security tomorrow. The Sidewalk’s destination is being poor.
  • The Slowlane — sacrificing today so that you can be better off in the future (the opposite of the Sidewalk). The Slowlane’s destination is mediocrity.
  • The Fastlane — working hard today on something that people value so that you can become wealthy in the next 5-10 years.
• Sidewalkers: view debt as an asset which enables them to buy more stuff, value spending over saving, and live a life of instant gratification. Sidewalkers don’t plan for the long term and blame external factors (taxes, “bad fortune”, etc.) for their situations. Because the Sidewalk is all about the short term, it doesn’t work well in the long term, and you end up mortgaging a stable future for a pleasant present. The sidewalk is a precarious place to be because external events like job cuts, recessions, interest rate hikes, etc. can be devastating for someone who lives paycheck-to-paycheck and doesn’t plan ahead. Note that being a Sidewalker doesn’t mean you are poor. Plenty of rich people like athletes and lawyers make a lot of money and then immediately spend it. This means that making more money will not help a Sidewalker because their philosophy urges them to spend whatever they make.
• Being wealthy is not about money, fancy cars, expensive vacations, or vacation homes in Fiji. Being wealthy means being healthy, being surrounded by great friends and family, and the freedom to live life how you want to live it. DeMarco calls these the 3 Fs (family, fitness, freedom).
• Faux wealth is the illusion of wealth. It’s having nice, flashy things that you can’t afford which take away your freedom and make you even more dependent on your existing sources of income.
• If you think you can afford it, you can’t. When you buy something cheap, like a candy bar or a pair of $10 sandals, you never ask “can I afford this?” or “how can I make this purchase work?”. If you are trying to justify a large purchase to yourself, then you can’t really afford it.
• Wealth, like fitness, requires hard work, discipline, and delayed gratification.
• A good process creates events that others view as luck. People see how you’re lucky to go to the school you went to, lucky to find success with the product you launched, and lucky to sell your company; they rarely realize all of the work and sacrifices that went in to get lucky. Thinking that people get rich because they are lucky is a very disempowering belief.
• Sidewalkers tend to pursue wealth events (lotteries, casinos, etc.) instead of processes. They assign control of their financial future to others (banks, employers, etc.), which greatly increases the chances of becoming victims and having poor results.
• The Slowlane is a poor choice because wealth is best enjoyed when you’re young, and not after decades of soul-sucking work. Furthermore, there are many factors outside of your control (like how your 401K does or whether your house price will appreciate), and it’s possible that after all of your sacrificing and patience, you still won’t end up wealthy. Plenty of people lost 50% or more of their savings during the recent housing and financial crises.
• Slowlaners: give up their time for money (spending an extra 2 hours on something is “worth it” if it saves $10), budget aggressively and look for deals and coupons, and believe that compound interest will make them rich. Some of these strategies are fine (it’s not bad to look for deals or to have a budget), but the problem lies in these strategies being the entireplan instead of being part of a bigger plan. Slowlaners sell their Monday thru Friday so that they can enjoy Saturday and Sunday — both literally and figuratively. People wouldn’t trade $5 for $2, so why would trading 5 weekdays for 2 weekend days make any more sense?
• “By working faithfully eight hours a day you may eventually get to be boss and work twelve hours a day” — Robert Frost
• In general, jobs suck because you have limited leverage (being 50% more productive will not get you a 50% raise) and limited control (what if you’re fired? What if your company is doing poorly and forces you to take a pay cut? etc.) General problems with jobs: you’re selling your time (and your life) for money, the experience you accumulate is limited (you’d learn much more running your own business for a month than working for someone else for a year), you’re subject to the whims of your boss/employer, you have to deal with office politics, and you have almost no control over your income.
• The problem with the Slowlane is Uncontrollable Limited Leverage. This means you don’t have a lot of control over your income and you don’t have opportunities for huge wealth accumulation. When you have a job, the measure of your value is time. If you want to do 20% more, you have to work 20% more, but the problem is that there are only so many hours in one day. You can double your work hours and be miserable, but you cannot 10x your work hours. On the other hand, if you have your own business, growing revenues 10x is certainly possible. Basically, time has no leverage.
• Another problem with the Slowlane is that compound interest does most of its work at the end of your waiting period. When you see charts that show that investing $10k will yield $2.5 million in 40 years, that seems great. What is less obvious is that your investment is $600k in 30 years and $160k in 20 years — almost all of the wealth is accumulated in the final decade. Having an extra $2.5 million in 40 years is not nearly as nice as having it now, but it’s also much worse than having an extra $50k/year for the next 40 years. To top it all off, what if the stock market doesn’t grow as much in the future as it has in the past? What if you have a heart attack in 30 years? What if inflation makes your $2.5 million feel like $200k?
• A survey by the Harrison Group found that 10% of those with a net worth of >$5 million got there through passive investing. Age data wasn’t provided, but it’s obvious that these penta-millionaires are not young.
• Quote from the book: “Think about it. Have you ever met a college student who got rich investing in mutual funds or his employer’s 401(k)? How about the guy who bought municipal bonds in 2006 and retired in 2009? I wonder if that guy driving a $1.2-million car can because of his well-balanced portfolio of mutual funds? These people don’t exist because the youthful rich are not leveraging 8% returns but 800%.”
• The Slowlane is filled with hope: hope that your stocks go up, that you get a promotion, that your employer stays in business, and so on. Hope is not a good plan. If you don’t control the variables in your plan, then you can’t control the outcome.
• Slowlaners believe education is the way to raise value. You only have 10 hours per day to work, so if getting a degree or certificate or whatever raises your hourly rate then you’ll be making more money. The problem is education is expensive in terms of time and money. Becoming a doctor will get you a $200k salary, but it will also take 10 years (leaving you fewer years to work) and saddles you with a lot of student debt. Furthermore, you become an indentured servant to your loans, which means that even if you decide you no longer want to be a lawyer/doctor/etc., you’re kind of stuck because you have big bills to pay.
• Watch out for the advice of “Financial Gurus”. They rarely get rich following the advice they give out — they get rich by writing books and giving seminars and the like. When you take financial advice from people, make sure that what they are teaching you is what actually worked for them.
• Dangers of the Slowlane:
  • What if you lose your health by the time you’re ready to retire?
  • What if you lose your job, hit a ceiling on the corporate ladder, work in a dying industry, etc?
  • What if your home value plummets instead of rising like you planned?
  • What if you’re not happy living a frugal/basic lifestyle?
  • What if the economy hits a recession? The stock market sometimes loses half its value over a few years — what if that happens right before you planned on retiring?
  • What if you get too frustrated with frugality and go on a spending spree (i.e. become a Sidewalker)?
• The way to build wealth quickly is to dramatically grow your income while controlling your expenses. E.g. your income triples while your expenses go up 10%.
• Differences between Slowlane and Fastlane millionaires:
  • Slowlaners take several decades to accumulate their fortunes; Fastlaners usually take 10 years or less.
  • Slowlaners need to live in middle-class homes; Fastlaners can live in mansions.
  • Slowlaners let the market control their assets; Fastlaners control their own assets and have the power to change their value.
  • Slowlaners are employees; Fastlaners are employers.
  • Slowlaners user mutual funds and stocks to get rich; Fastlaners use them to stay rich.
  • Slowlaners let others control their income streams; Fastlaners control their own income streams.
  • Slowlaners use their house as part of their net worth; Fastlaners use their house for residency.
• The Fastlane is all about Controllable Unlimited Leverage. You want maximum control over your success and you want your success to be scalable (so that you can get a 100% return or a 1000% return, not just a 10% return). The Fastlane road is all about business, self-employment, and entrepreneurship, and about building wealth rapidly.
• Fastlaners view debt as a useful tool for growing their systems, time as their most important asset, and making something of value as their primary means of wealth accumulation (in contrast, Slowlaners view passive investing as the means to getting rich).
• The Fastlane is all about “Get Rich Quick”, but that is NOT the same thing as “Get Rich Easy”. It will take a lot of work and you might spend 5-10 years focusing on your business before you reach the kind of success that you want. The upside is that once you’ve reached your desired level of wealth, you will have the freedom to do whatever you want for the rest of your life.
• The Fastlane mindset requires that you be accountable, not just responsible. Being responsible is admitting when you’re at fault for something; being accountable is changing your behavior so that it doesn’t happen again.
• In terms of building wealth, the goal is not to do the heavy lifting, but to create a system that does it for you. Again, this doesn’t mean avoiding work, but it does mean being resourceful and optimizing and automating relentlessly. For example, let’s say you have to build a pyramid out of heavy stones. The Slowlane approach is to carry the stones yourself, one at a time. Of course, this will take decades. The Fastlane approach would be to spend the first few years designing something to move the stones for you: a crane, a pulley system, whatever. After your up-front investment of thought and effort, the pyramid will be easier to build once you have your machine.
• The key to the Fastlane is producing instead of consuming. Don’t be the guy who buys a franchise, be the guy who sells franchises. Don’t be the one buying products you see on late-night infomercials, be the one selling them. And so on.
• A few examples of Fastlane projects: write a book (lots of work, but then it makes money forever without you having to put in more work), make an invention (lots of work, but then you get royalties for a long time).
• “Only those who risk going too far can possibly find out how far they can go.” T.S. Eliot
• In the Slowlane, the main variable that you can tweak is time. You can work 12 hours instead of 8, or invest a weekend into a workshop. In the Fastlane, there are many variables you can tweak: conversion rates, production costs, advertising spending, pricing, etc. You might be able to increase your profits 5x or 50x in one year if you make the right choices.
• One important aspect to consider if the size of your potential market. If you have a hot dog stand, then you’re an “entrepreneur” but your growth potential is limited. You can sell 50% more hot dogs at your stand, but you can’t sell 100x more hot dogs unless you do something different (buy more stands, go into a different business, etc.) Your profit potential is based on two things: the size of your target market (local < national < international… the internet is a lot of help here) and how much you impact each person (tiny impact < moderate impact < huge impact).
• In the penta-millionaire study cited earlier, 80% of millionaires made their wealth by either starting their own company, or working for a small company that had explosive growth.
• Slowlaners buy depreciating assets like cars and electronics; Fastlaners buy appreciating assets like patents, businesses, and cash flows.
• Many industries have a standard multiple that defines a business’s value in terms of its cash flow. For example, if your advertising shop makes $100k/year in profit, and the multiple for the advertising industry is about 2.9, then your business is worth approximately $290k. Multiples range from 3-5 for traditional stores to 6-10 for computer and engineering related businesses to 15+ for things involving patents, medical devices, etc. If the multiple for your industry is 10, then making an extra $1 of profit raises the sale value of your business by $10. How’s that for leverage?
• Money trees are a great way to build wealth. A money tree is a business system that lives and grows on its own. Examples of money trees:
  • Rentals. You can rent out real estate, permission to use your patents, play your songs, etc. Your investment is the effort and cost to product/acquire the product being rented, and then you can collect rental payments without doing a lot of extra work.
  • Software. If you put something up online, you implicit get the leverage of having it available all over the world, 24/7. Things that are too niche to work on a local level can be big successes with a global audience.
  • Content. When you write a book, create a CD, etc. you can make a lot of money selling your content. Again, the time investment is paid upfront and then you can profit from the same product for a long time.
  • Distribution Systems. If you create a system that others use to make money, you can make a lot of money. This includes storefront that wholesalers use (e.g. Amazon.com), Apple’s App Store, franchise creators, etc.
• The best money tree is actually money itself. When you have money, you can move from borrowing to lending, from customer to owner, etc. The difference between Slowlane and Fastlane is that the Slowlane starts with $5 and waits for it to compound to millions. The Fastlane starts with millions and uses interest as a source of income (not a source of growth)
• Law of Effection – the more you affect people’s lives (in terms of effect/life and # of lives affected), the richer you will become. It’s all about scale and magnitude.
• When you’re starting a business, the best business structures are an S Corp or an LLC. They all offer limited liability and tax efficiency. Avoid partnerships and sole proprietorships, which do not limit liability.
• Choices you make early on will have the most impact. If you change course by 1 degree in the beginning of a 5000 mile trip, it makes a huge difference. If you make that change in the last 100 miles, you’ll still end up in about the same place.
• You can make two types of choices: what to think and what to do. The first step to making better choices is to work on how you think and perceive things — that will dictate the actions you decide to take. For example, if you want to build wealth, you first have to believe that you can do it, that you don’t need to wait until you’re retired to be a millionaire, and so on.
• If you don’t believe something and it stands in the way of taking action, then find the evidence you need to change your belief: look for stories of people who have done what you want to do, figure out how they did it, etc.
• People who react to your goals and dreams with doubt and discouragement should be ignored. Befriend people who are where you want to be and who encourage you and inspire you to be your best. Find a mentor. A lot of times, your spouse will be you biggest detractor or your biggest supporter.
• If you want extraordinary results, you need extraordinary thinking.
• Two good techniques for making choices:
  • Worst Case Analysis (WCA)
  • Weighted Average Decision Matrix.
• WCA: What’s the worst case? How likely is it? Is this an acceptable risk?
• WCA makes it very easy to eliminate bad choices.
• WADM: figure out what factors matter to you, give each of them a weight, rate on your choices on each factor, and then multiply these ratings by their weights to get the score for each choice. For example, let’s say you’re looking at apartments, and the 2 factors you care about are location and price, with location being 2x as important as price. If apartment A gets a 5/10 on price and an 8/10 on location, its score is 5+8*2=21. If apartment B gets an 8/10 on price and a 6/10 on location, its score is 8+6*2=20. Based on this, you should go with your apartment A.
• Your time is precious, don’t waste it (on video games, tv, etc.) and don’t trade it away for pennies (e.g. wait in line for 4 hours on Black Friday so that you can get a $30 discount on a TV). Don’t value your time at zero. Your time is finite and always decreasing — treat it as such.
• You have free time and indentured time. Indentured time is for stuff you have to do: brush teeth, shower, commute to work, work, etc. Free time is everything else. Money buys free time and eliminates indentured time.
• Your debts are parasitic because they force you to work harder and longer. Your mortgage, car payment, credit card bill, etc. all force you to work more than you had to if you bought less stuff. Having to work limits your choices. When you’re making a big purchase, consider its time cost. Is that $50k BMW worth 1 year of your life?
• The key to controlling parasitic debt is to control instant gratification. It’s much easier not to each chocolate cookies if you don’t bring them home from the grocery store, and it’s easier to avoid debt if you don’t buy useless things. When you’re thinking about buying something, think about whether you really need it, whether you’ll still be using it 6 months from now, and so on.
• Fastlaners are frugal with time while Slowlaners are frugal with money.
• Learning new things, mastering new skills, etc. can open up a lot of doors for you.
• Fastlane education is about learning specific skills to grow your business skill. Slowlane education is about increasing the intrinsic value of the person being educated. It’s best to learn from doing things in the real world than from books and professors.
• If you don’t think you have time to dedicate to learnings things, multitask by learning while you drive, exercise, walk, sit on the toilet, etc.
• Focus on topics that interest you or on areas of your life that need improvement.
• Don’t waste your money on expensive ($3k+) seminars and workshops. Those make the speakers rich but are rarely worth the money for attendees.
• There’s a big difference between interest and commitment. Interest is reading the book or wanting to build a website; commitment is applying what you learned and buying the domain. From Randy Pausch’s Last Lecture: “The brick walls are not there to keep us out; the brick walls are there to give us a chance to show how badly we want something. They are there to stop the people who don’t want it badly enough.”
• Failure is the sweat of success. You can’t build your cardiovascular strength without working hard and sweating, and you can’t experience success without failure.
• People fear failure because they overestimate the worst-case consequences. But the worst case of failing at business is usually going back to work or trying again. That’s not that bad!
• There are smart risks and idiotic risks. Stupid risks have limited upside and unlimited downside. For example, not keeping a backup of your work saves you a little bit of time and money, but it can be devastating if you lose your only copy. In contrast, smart risk don’t have a lot of downside, but have big upside potential – investing in your own business is a good example.
• People don’t take action because they’re waiting for *someday*. Someday I’ll start a business, someday I’ll do this or that, etc. The problem is, *someday* never comes. Making plans but not acting on them is dangerous and paralyzing. Make *someday* today.
• 5 Laws of Effection
  • Commandment of Need – Nobody cares about a business whose sole purpose is to let its owner get rich or do what he loves. Never start a business just to chase money, start a business to chase needs, pain points, etc. The amount of money a business earns is a reflection of the amount of value it has provided. The “do what your love” meme is nice, but in order to work, what you love must solve an actual need. (People don’t pay to satisfy your need to do what you love, they pay for you to solve their problems.) On a side note, don’t turn your passions into derivative businesses (e.g. you like bodybuilding so you become a personal trainer). Derivative businesses don’t make money quickly and they endanger your passion. You do need to be passionate about your business, however, and you will need to find a source for the passion. That might involve being passionate about solving a problem, or being passionate about paying off your mortgage, or something else. Basically, you want a compelling reason to get out of bed every morning and give 100%. Passion erases the suffering of work.
  • Commandment of Entry – The harder it is to enter your business, the better you business will be. If all it takes is a $100 distributor kit, then you should wait for a different opportunity. If you violate this commandment, you have to be truly exceptional at what you do (e.g. anyone can play poker, and you have to be really great at it to make real money as a player). If getting into your business is an event, then there’s a low barrier to entry; if getting into it is a process, then there’s a high barrier to entry. If “everyone is doing it”, then you want to do something else, because “everyone” isn’t wealthy. When everyone is buying houses, sell yours. When everyone is selling stocks, you should buy. And so on. When “everyone” is doing something, that’s a red flag.
  • Commandment of Control – You’re either in control of your financial plan or you aren’t. You can’t let someone else drive if you want financial success. This means you want to sell franchises, not buy them; offer affiliate programs, not use them; accept rent and royalties, not pay them; and so on. If you are on the wrong side of these systems, it means your well-being in someone else’s control (e.g. the franchise owner wants to raise fees or the affiliate program decides they don’t want to do business with you anymore.) If someone can flip a switch and ruin your business, then you’re playing Russian Roulette with your financial plan.
  • Commandment of Scale – There are levels of business scale: community, city, state, region, national, and international. The larger your scale, the bigger your leverage. Profit = units sold x profit/unit. If there is a cap on the number of units you can sell, you’re not going to go very far! When you’re thinking about a business, think about whether it can scale from $2k in profit to $200k, whether you can potentially support millions of customers, and what your best case potential might be. If the business has little room for growth, think about entering a different business.
  • Commandment of Time – Can the business be automated? Are margins large enough to hire others to do your work? Could you (eventually) get the business to operate without spending much of your time on it? Running a coffee shop is an example of a business that violates the commandment of time. It requires a lot of work, and the margins are rarely large enough to hire someone to do the work on your behalf — that means you can’t extricate yourself from the day-to-day business.
• Summary of 5 commandments: don’t invest in businesses that don’t address needs; don’t trade time for money; don’t operate on a small scale; don’t relinquish control; don’t let the startup be an event instead of a process.
• Starting a business is a big decision. Don’t treat it lightly, otherwise you’ll just be starting a hobby (and will get paid like a hobby).
• Some specific Fastlanes which satisfy all 5 commandments:
  • Internet – it scales globally and a lot of work can be automated with software. 7 broad categories of internet business models:
    • subscription-based – charge a regular fee for using some tool or data
    • content-based – charge people to read or distribute your content
    • lead generation – charge businesses for connecting them to consumers (great for fragmented industries)
    • social networks – target ads and products at a specific group of people
    • brokers – connect buyers and sellers together (paypal, ebay, CarsDirect, etc)
    • advertising – like brokers, except they charge advertising fees instead of per-transaction fees
    • e-commerce – sell goods and services online
  • Innovation – invent a product and then manufacture and distribute it. Note that most people think innovation requires radically new products, but there’s a lot of money to be made in small improvements (e.g. look at the evolution of television sets or cell phones). Invention is part of the process, but distribution is where you make money (whether you do it yourself or license your product for someone else to distribute). If you make a great product but can’t distribute it, you won’t make a dime. Author’s quote: “writing a book is not a business; selling the book is.”
  • Iteration – take something that violates the commandment of scale (buying a franchise, buying and renting out real estate, etc). You won’t make a lot of money if you own 1 Starbucks, but if you use the profits to buy a second, and then a third and a tenth, your income will grow dramatically. The downside is that iteration can be very slow.
• Opportunities are everywhere, people just don’t see them. Whenever you hear people complaining or you observe inefficiencies, those are great opportunities to start a business!
• If you have a great idea but someone is already doing it, don’t worry and do it anyway! There will always be competition, and you should aim to be better than them, not to run away from them.
• Forget chasing big ideas and instead try to take something and make it better. Starbucks, McDonald’s, Walmart, etc. are all iterations of ideas and businesses that had existing for many years.
• There are code words that suggest opportunities. When you hear one of the following, there might be a great business opportunity ahead:
  • “I hate..”
  • “I don’t like..”
  • “I’m frustrated by…”
  • “Why is this like this…”
  • “I wish there was…”
  • “I’m tired of…”
  • “This sucks…”
  • etc.
• When you hear about discomforts and inconveniences, think of how you could address those complaints.
• When you chase opportunities, you will occasionally fail. What matters is what you do after you fail — do you try something new, or do you give up and move back to the Slowlane? Oftentimes, a failure drives you in a better direction (e.g. the discovery of penicillin or Flickr pivoting from being a video game to being a photo-sharing service).
• The price of freedom is money. Whether you want to buy a nice car, start a non-profit foundation, or work on your personal dream project, not having to worry about money is what lets you focus on those things. Figure out what you want so that you can work backward and figure out what you need to get there.
• Step 1: What do you want? Be specific: a 3000 square foot house, private school for 2 kids, a summer home in the Caribbean, etc.
• Step 2: Figure out the monthly cost. For example, $3k/month for the house, $2k/month for private school, $1k/month for the summer home, etc. Add your living cost (e.g. $4k/month for groceries, clothes, health insurance, etc.) Multiply by 1.65 to account for taxes. E.g. in this case, you have 1.65 * (6k+4k) = $16500/month pretax.
• Step 3: Figure out your targets. Your goal net worth should be about 20x of your yearly requirements (5% return is a good, safe ROI to assume for your assets). Your money system/business goal should be about 5x of your monthly requirements, so that 40% goes to taxes, 40% goes into the money system, and 20% goes into your lifestyle.
• Step 4: Make it happen. Note that if your goal is $50k/month in profits, you’re not startings with that, but just keeping that in mind as your target number. First you build your profit to $500/month, then $5k/month, then finally $50k/month.
• Living beyond your means is never a good idea. The difference between Slowlane and Fastlane is that Slowlaners seek to shrink expenses while Fastlaners seek to grow income.
• Customer complaints are some of the most useful feedback that you will get. There are 4 types of complaints:
  • complaints of change – you changed your product and existing users don’t like change. These are hardest to decipher because sometimes people complain because your changes are bad, but sometimes they complain because they just don’t like change. Tread carefully.
  • complaints of expectations – the customer didn’t get what he expected. These are very useful because they show that you either have to work on delivering more utility or on lowering expectations.
  • complaints of void – the customer wants something that you don’t offer. These complaints are a goldmine because they show you what customers wish they could do with your product. Solve your recurring complaints and you will have a lot of happy customers.
  • fraudulent complaints – complaints from customers who are trying to exploit the business. Respond gracefully and then move on.
• The key with complaints is realizing that you can’t please everyone all of the time. You should be nice to all of your customers, but that doesn’t mean you have to do what each person asks for.
• A terrific way to grow your business is to have amazing customer service. When you surprise and delight your customers with your service, they will do your advertising for you. Figure out what kind of service your customers expect and then exceed it: if they expect a call with 24 hours, try to call within 1 hour; if they expect to have to search for your contact number, put it in bold at the top of the webpage; etc.
• On the flip side, no matter how awesome your product is, if people deal with crappy customer service then they’ll be left with a bitter taste in their mouths.
• Don’t approach your business from only one angle. You don’t want to have a single strategy for your business success (e.g. “I’m just going to compete on price”). You want a multi-pronged attack where you work on your marketing, your execution, your product, your customer services, your ideas, and so on. You can raise prices, lower costs, sell more to existing customers, find new distribution channels, and so on. Don’t just focus on one thing to the exclusion of everything else.
• The best way to figure out where to go next is to list to the rest of the world. You should come out with a minimal version of your product and then see how customers react. Their reactions will guide you during your next iteration.
• Make sure you have a great accountant and a great lawyer. These people are very important because they have “the keys to your castle”, so to speak. Search for them like you would search for a business partner: they should work hard, be trustworthy, have the same vision as you, and so on.
• If your business makes money, then eventually you’ll run into competition. The best way defend against competition is to build a brand that people trust/admire/love.
• Steps to brand-building:
  • Have a unique selling proposition. This is what sets your business apart from *everyone* else. If you don’t have a USP, then by definition, you’re just like everyone else. A good USP addresses a benefit (e.g. Zappos USP is the ability to purchase shoes without worrying about returning them), be specific (“lose 20 pounds or your money back” instead of “you will lose weight”), and be clear and concise. Finally, make sure your USP is true. If you promise people something, make sure you deliver on it 100% of the time.
  • Good ways to stand out from your competitors: polarize people, arouse emotions, encourage interaction, and be unconventional
  • Talk about benefits instead of features. For example, if you’re selling cufflinks, talk about the benefit (“you’ll look elegant and classy”) instead of features (“they are made of expensive metals”). A good way to think about benefits is to think about your features, think about the advantages each feature offers, and then frame those advantages as benefits.
  • Use price as a branding weapon. Price implies values, and you should use this to your advantage. If you have a great product that you underprice, you’re undermining your own efforts because your great product will look “cheap”.
• Scattered focus leads to scattered results. Focus on one business at a time instead of pursuing many different projects at once.