67. Trini Amador: The Business Tools to Shift Customer Behavior in Your Favor

Every successful business is built on empathic understanding of customers’ preferences. As we know from the theories of Austrian economics, the preference scales of every individual are highly subjective, idiosyncratic, context-dependent, and highly changeable. How does an entrepreneur develop the appropriate level of understanding? Can this understanding be a source of business-building advantage?

We talked with Trini Amador, a returning guest and an in-demand global branding and marketing consultant who has developed an effective process for every entrepreneur to achieve a breakthrough level of insight into customer motivations.

Key Takeaways & Actionable Insights

Customers bond with businesses and brands they love and trust. The choices they make have their own internal logic. Entrepreneurs must develop insights into their motivations.

Insights are the lifeblood of any brand- or business-owner, says Trini. Why do customers behave the way they do — especially in buying or not buying? Insights tell you. They become the difference between “just a business” and a brand that successfully delivers against the needs of their customers.

Insights are the entrepreneur’s understanding of customers’ motivations, values and attitudes.

They’re the “Why” in why people act the way they do. Always emotional, always subjective. Entrepreneurs who understand “Why” can design stimulus or communication or innovation to motivate buying behavior.

There’s an insights generation process. It starts with identifying the people you wish to serve.

Trini recommends a focus on your “core target” audience — not a general definition of who might buy, rather a highly specific profiling of your most likely and best prospects. Mark Packard, in episode #62, called them “high knowledge” customers. They know what they want, they know the category and they’re precise about what experience is satisfactory and what is not.

There is no shortage of data for you to utilize. Make sure you select the most important and useful data:

Attitudinal data: how your customer feels, especially if they are expressing dissatisfaction;

Behavioral data: behavior reveals preferences — “motivations are embedded in behaviors”.

The best sources of data are first hand observation and one-on-one conversation.

Organize your data in an insightful way.

To avoid data overload (there’s so much of it to collect!) Trini suggested  couple of organizational techniques.

One is visualization: build a visual profile of the customer with photos and notes indicating their hobbies, favorite brands, activities — visuals that depict their behavior and preferences.

A second is personalization: write a composite profile as if it were one individual and use it as a “one perfect customer” persona.

The objective is to change behaviors. Insight is the required key to unlock the possibility of doing so.

Trini cited the example of his own wine brand from Sonoma County, California: Gracianna. For example, the objective may be to get people to visit the tasting room who have never visited before. That’s a behavior change.

Why do people behave the way they do? One inquiry tool is the 5 Why’s, which is a way to examine the sequential rungs on the individual’s means-ends ladder to identify their highest value, the motivation that is ultimately driving them. Trini used the example of why some people feel better about buying a Tesla than an alternative vehicle. Ultimately, they want to feel that they are better citizens of the planet. Trini entertainingly ascends the rungs of the ladder from “need a new car” and “get from A to B” to arrive at “the feeling of being a better citizen”.

Using these tools, we arrive at a deep understanding of why customers make the choices they make — that is, an insight.

The Insight feeds the Behavior Modification tool.

The definitive “Why?” that emerges from the 5 Why’s inquiry becomes the current state in the behavior modification tool. This tool has two components:

Attitude Modification: behaviors are related to attitudes, and so to change an attitude can lead to a change in behavior. Attitude modification documents the FROM (the attitude we want to change) and the TO (the new attitude we want to encourage).

Key Marketing Platform: a marketing platform is a staging point for all initiatives aimed at achieving the desired attitude among target customers: communication, promotion, innovation, distribution, relationship.

Continuing the Tesla example, we want our prospective customer to feel that Tesla is the most progressive electric car that helps save the planet in the coolest, most prestigious ultra-premium way. If we can get them to feel that way, they’ll buy. The entrepreneur imagines the future behavior, and then acts through the marketing platform to cultivate that motivation.

How? Consider all resources that fall under the headings of communication, innovation, promotion, expanded distribution, and enhanced relationships. Experiment, experiment, experiment. Test, test, test. We’ll discuss the techniques in a future episode of Economics For Entrepreneurs.

Free Downloads & Extras

Insights Statement Template: Our Free E4E Knowledge Graphic
Marking Platform Tool: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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John Tamny On How The Entrepreneurial System Maintains Its Energy And Momentum.

Hunter: John, welcome to Economics for Entrepreneurs.

John: Hey Hunter. Thanks for having me on.

Hunter: You make economics relevant and interesting and you’ve been doing it for a long time. You’ve written lots of articles, and several books. You have a very distinctive style, and so we’re going to talk about economics today and maybe get your help in making it palatable to people.

Economics Is More Interesting Than Charts And Graphs.

John: You know, I make it relevant and interesting simply because it is. I think it was Ludwig von Mises in Liberalism, his brilliant book, who made exactly that argument. That he said it’s not a dismal science, it’s a beautiful study of people and he put it better than I did. I never understood why economists have the need to turn into charts and graphs what is so easily described by the world around us. It’s as though they’re striving to make something unintelligible so they can avoid revealing how little they understand.

Hunter: Well, you coined the phrase, in the title of one of your books, Popular Economics, and that talked about LeBron James and Downtown Abbey, and I think Taylor Swift and I think you also mentioned Michigan State football at the same time. You found a way to talk entertainingly about popular economics. How did you come by that title?

John: I think, I think my initial title was “Economics Is Easy”. It’s the one time in the history of my writing career, at least of books, that the publisher I thought came up with a better title. At one point they had water cooler economics, and I said you’ve got to be kidding me. They finally happened on popular economics which I kind of liked. Again, my view is that economics is 1st grade material. The only people that really don’t understand economics are economists who try to make, who make confusing what is easy to understand, what can be explained by athletes and TV shows, movies and famous people. I just don’t get their use of charts and graphs and so on. In many ways Popular Economics and all my books are subtle middle finger to economic profession that’s made boring what’s endlessly interesting.

Hunter: You chose to keep the term economics, I was talking to a marketing guru this morning about marketing Austrian economics, and he said there’s no place for the word Austrian and no place for the word economics, which was a bit discouraging. But do you think you’ve been able to make progress towards a popular realization towards the benefits of thinking economically?

John: I’d be lying if I thought I made huge inroads. Clearly I haven’t. I haven’t changed the way so many people continue to see things. I long ago said it’s going to be my life’s work is discrediting the laughable notion that economic growth causes inflation. Yet to pick up a Wall Street Journal, New York Times or an Economist magazine or anything you constantly see economists say, well you know, if we get the economy moving fast it’s going to cause inflation. And so, clearly there’s a lot of work left to be done, but it’s very heartening to come across people, and I do with great regularity, people who say, you know, you’re book changed how, or your books changed how I view the world, how I saw, you made clear what would have been confusing So that’s an uplifting thing.

Why Are Economists So Negative?

Hunter: Yes, I was reading the Wall Street Journal this morning, and I just came across the phrase at the end of a sentence that said, “economists warned”, and it struck me that that’s what economists do. They’re all negative and warning and it’s going to be bad.

John: Yes, isn’t that true? They are always looking for some awful scenario and if we do this and this, we’ll get to this. What frustrates me is, they are never right. Okay, so it’s easy to pick on the Fed. The Fed employs more economists than any other entity and they’ve always been incorrect. And of course they always have been; and let’s add that, when I was at Goldman’s Sachs, the economist there were so notoriously incorrect that the clients of the firm would know it was a profitable endeavor for them to just bet against whatever the Goldman’s economist thought was going to happen. Just take the opposite position and it really is shooting fish in a barrel based on the opposite of what the economist thinks about something. Okay, so some individual thinks he or she can model the infinite decisions taking place every second among hundreds and millions and billions of people around the world, of course they’re wrong. What fascinates me is that any people ever took them seriously to begin with. The pretense is just remarkable.

Hunter: Yes, in fact the whole premise is wrong, that the goal is to predict. We understand from our Austrian view of economics you can’t predict, the future is uncertain, and you can’t predict the future.

The Economy Is Just Individuals – And Freedom Works.

John: That’s right. We just know that freedom works. That free people with barriers to their productivity removed from them tend to do very well. That’s not to say that there’s not some extraordinarily productive people who do very well with more barriers put in front of them. Look at New York, and California, two heavily regulated, heavily taxed states and that have got the most innovative brilliant people on earth populating both. But generally speaking, if you remove barriers you get more productivity and this shouldn’t be a mystery; yet economists try to model behavior, which is just an obnoxious waste of time.

Hunter: We’ve tried to go through that other door John, the individual door – specifically entrepreneurship. Academically, that’s called microeconomics, but I don’t think that’s a useful differentiation. You said in one of your books, the economy is just a collection of individuals, and you also talked about an intense entrepreneurialism that defines the American economy. So paint that picture for American entrepreneurialism, I hear you linking individualism and entrepreneurship in one system.

John: Oh, what a great question. Okay, so let’s start with the economy is just individuals. The person who most vivified that for me was Henty Hazlitt. I think that the most important sentence ever written in the economics book ever written was Hazlitt’s in Economics in One Lesson. He wrote, quote, what is harmful or disaster to an individual must be equally harmful or disastrous to the collection of individuals that make a nation, end quote. And so what was Hazlitt saying, it was so brilliant, of course probably most people glossed over it, it’s not a knock, but Hazlitt was saying the economy is not some living, breathing blob that you can touch. It’s just a collection of individuals. Break the economy down to the individual you can then see why economic growth is so simple. You can also see why, why you’ll never lose an argument, an economics argument ever again because I don’t care what someone’s ideology is on an individual level you can’t say an individual’s improved economically if he’s taxed more. No individual’s improved economically if he spends more time complying with regulations rather than creating something. No individual’s improved by money that’s constantly being devalued by the US Treasury. No individual is improved if talented people from around the world are barred from moving to and living in another country by putting tariffs on these other people. And so when you break the economy down to the individual everything becomes clear. What improves the individual improves the economy. Why are Americans so entrepreneurially focused? To me it’s fairly obvious. We descend from the crazies. We descend from the other thinkers from around the world who said this isn’t good enough for me, I’m going to risk my life crossing oceans and borders, in order to get to a place that offers me no security but offers me freedom. We got all the nut jobs. How could Steve Jobs, he’s of Syrian decent, could he have started Apple in Syria? No. in the United States people who think differently can very often be funded and so they keep doing amazing things. It’s no mistake that our entrepreneurs are known around the world. We descend from the people who took the ultimate entrepreneurial leap. They left what was in some sense, comfortable, in search of just freedom. So I love the American story and I, one of the reasons I’m so for open borders is I want more and more people to come and participate.

Hunter: We’re aligned about improving individuals economically and one of the themes that we use in thinking about entrepreneurship is the ethic of entrepreneurship which might be a bad word to use. It sounds a bit serious, but that the purpose of entrepreneurship is to improve other people’s lives and that’s a benefit. It rolls up to a better society and we should think of entrepreneurship as a service to others. Is that a useful theme do you think?

Entrepreneurs Lead Us To A Better Place.

John: I would say maybe, turn a phrase a little bit differently. I would say entrepreneurs lead. They lead us to a better place because, never forget , to me the definition of an entrepreneur is someone who’s got a vision that everyone else thinks is ridiculous, yet they do it anyway. Because they think the way things are being done now: nah. So they quite literally lead us to a better place. I’ve heard it’s apocryphal, but Henry Ford’s genius was realizing that the, you know, horse drawn carriages weren’t enough. So he would give people something different. Steve Jobs looked at the Blackberry phone and he thought, “Oh! Come on!”. Yet that’s what everyone wanted at the time. He thought, oh we can improve on that, and let’s never forget he was ridiculed at the time the iPhone was coming out. Most people thought it would be a niche product that most people wouldn’t buy. I’m fascinated to look at Elon Musk right now, his new SUV, the design of it came out and he said something along the same lines that this is something in the future and that’s what Mises said in liberalism. He said entrepreneurs, every entrepreneurial act is speculation. You’re doing something you’re not sure people are going to want and that’s what’s so important about entrepreneurs. They take us somewhere else. They don’t just meet our needs, they exceed them. They take us to a new place.

Hunter: Jobs had another phrase, which is a real challenge when you think about what it takes to be an entrepreneur. We’ve got to read what’s not on the page, and you know, it hasn’t been written down yet. We’ve got to be able to read it. That’s why he rejected consumer research and that kind of thing. So they lead but they also imagine things that other people don’t imagine. Is that how you see it?

John: Oh, without question. They are the outside thinkers. They envision things that only become obvious after the fact. Let’s never forget that Silicon Valley is littered with VC’s that turned down Facebook, that turned down Amazon. I remember in the year 2000, 2001, if you owned Amazon shares you were ridiculed. Remember Amazon was Amazon dot org. These are people that think so differently and have a vision that is so outside the norm and it’s one reason, I don’t want to get, I promise I won’t take us to much off subject, but I’ve, one of the people I think who’s needlessly facing trouble right now is Elizabeth Holmes. She had a vision for something different, and it attracted a lot of attention and now because it didn’t work on time they’re thinking about, they want, some people want her imprisoned. What these creative types who want to do something differently, I want them out creating. Michael Milken, decade ago, because he did something so differently and upended the norm of investment banking, put him in prison and you think about what did we lose? Here was the guy who said MCI is a nothing company, I’m going to find funding for it so that it can take on A T and T, which at the time employed 1 in 500 Americans. And then he saw the future of mobile phones. Mobile phones cost 4,000 dollars. No one could afford, it was seen as this weird luxury bauble for the rich and he thought, there’s a way to get that funded. How could we live without it? I not only think entrepreneurs are important in taking us to new places. I also elevate investment bankers and the Wall Street types that so many people keep criticizing. They figure out a way to get financing to these brilliant people.

Hunter: Yeah, so socially we should be encouraging all of that craziness, that imagination and getting them capital as you say. The barriers are often governmental; you write a lot about barriers and regulation and how the government is taking away our production. I love that term that you use. It makes things very clear. Is that the only barrier in society to the entrepreneurs?

Failure Of Imagination Is As Damaging As Regulation.

John: They’re broadly governmental. I also think that there can be a failure of imagination on the part of people. Let’s be clear, it’s hard enough, there’s no reason investment bankers are paid so well. They are because it’s enormously difficult to track capital to one’s venture, and so it’s hard enough for a business and so investment bankers are paid enormous fees, rightly, for getting capital. Imagine if you’re someone who has an idea that totally upends how things have been done in the past. Let’s be clear, there’s someone out there right now whose going up in Amazon, but imagine trying to get funding for that. So there are nongovernmental barriers for sure. One of them is failure to imagine what could be, entrepreneurs see that. But generally I think there governmental.

Hunter: You’ve written that it’s actually a good thing because it forces the capital to find the best ideas, it forces the best ideas to find the capital. I like the chapter about Hollywood. All the lights are always red in Hollywood. It’s hard to get financing. That’s why the movie industry’s so great.

The Scarcity Of Capital.

John: Of course capital is scarce. There’s this idea out there, and I think sometimes modern Austrians promote it, that there’s such a thing as zero interest rates. There never has been, never will be. The idea is that capital is always scarce. It always has been because when you borrow money, you’re borrowing what money can be exchanged for. You’re borrowing access trust, tractors, computers, desks, chairs, movie scripts, movie cameras, movie directors, and so it’s always going to be difficult to get access to these kinds of resources. And so what I usually say with that in mind is: how dangerous is government spending? Government spending shrinks the availability of what’s going on, what’s accessible out there. But I think this is important, I’m so glad you his on this because I think too often modern Austrians, once again, I don’t think Mises ever would have really fallen for this, from what I’ve read of him and I’ve read the vast majority of books, this idea of easy money, I find that so insulting and stupid. Easy money? Really? No such thing. Implicit in easy money that oh, yeah, here, line up, zero percent rate, one percent and you can get access to the economy’s resources. I’ve never met an entrepreneur who’s ever had an experience like that. I’ve never met a businessperson, who’s had an experience like it. In Hollywood as I wrote in my Who Needs The Fed book  – credit is incredibly expensive. In Silicon Valley it’s so expensive that, if you want to fund a business, you’re going to give up a big percentage of it to a venture capitalist. Michael Milken got rich precisely because the availability of credit and capital of businesses is exceedingly hard to get. So he found it for businesses that, in past times could never really get it. So I think our side does so much damage to itself when it talks, oh yea, you know the fed went to zero and money’s easy. No such thing. Let’s not insult the entrepreneurial function by pretending that the fed, just by printing dollars can make access to resources easy. That insults the entrepreneur.

Hunter: Yes. I’m with you and you would have enjoyed a recent episode we had on the FinTech industry. Financial technology I guess its short for. The point we made is that it’s all these new emerging online lenders like Kabbage and GoFundMe and those kinds of apps are a brilliant way to match capital to entrepreneur sand entrepreneurial projects, and in fact, because there’s so much competition there, we’re probably approaching on those platforms what Mises would have called the originary interest rate – the right interest rate for society in respect to regulation. So actually, FinTech embodies entrepreneurs helping entrepreneurs in getting to the right understanding of interest and the cost of capital.

John: Yeah, but, I think Mises would also agree that the interest rate is different for everyone. And of course it is. If I go into a bank and want to borrow money for a business there’s probably no rate at which they’d lend to me. Jeff Bezos can give away all his worldly possessions today, but he can still walk into banks in any city in the US and he can walk out with billions. Credit is what you bring. Or I think JP Morgan said that. This idea that I think too many Austrians promote, “oh yeah, the fed went to zero and suddenly it was easy money” is so divorced from reality. Everyone’s got a different rate, as I keep arguing based, you talk about Fintech, is just a reminder that the feds influence on the economy is theoretical. The fed projects its influence through a banking system that is antiquated and yesterday. It represents, what, 10 to 15 percent of total lending. It’s the least intrepid of lending of all. Most intrepid lending takes place well away from the banking system and for obvious reasons. There’s this view that the fed is why banks pay so little for deposits. Banks pay so little for deposits simply because they’re not taking any risks. If they were taking risks they would pay more and so you see through these fintech functions. That’s where you can get a higher interest rate simply because the capital allocations that they’re making are more risk focused. Banks are in business to not lose money. Other non-banks are in the business of doing different things and so the rates they pay for those who put money with them reflect that reality.

Hunter: Our expert on that show, Dusty Wunderlich, said it’s the best priced capital market for entrepreneurs.

John: I believe it because, let’s not forget, an entrepreneur can never go to a bank. And again, it just, this is not, I love the Austrian school, but I’ve never understood the modern focus for the fed. The fed deals with banks which are so unimportant. Does anyone seriously think that banks have anything to do with what happened in Silicon Valley? Banks can’t touch innovation and they can’t because as you and I know entrepreneurs fail over 90 percent of the time. Banks have to make loans to entities that are going to pay back. Entrepreneurs are in the business of experimenting, failing and trying again. What the fed and banks do has nothing to do with economic progress. So the focus on it has always been a mystery.

Entrepreneurs Are The Driving Force.

Hunter: Yes, we focus much more on the parts of human action that talk about the entrepreneurs being the driving force of the system. And that’s the other genius of Mises is having identify that and described it and understood how it works.

John: Yeah, without question. Entrepreneurs lead, they take the risks to move us forward and that’s why I make such energetic arguments in favor of reduced government spending, reduced taxation, ideally no taxation on capital gains. I do want it to make it as easy as possible for those with unspent wealth, those with unspent wealth arguably being the most crucial people in the economy to match their unspent wealth with entrepreneurial, and what’s important about this is the less we take away their unspent wealth the more they can be intrepid with it. They can try new things. If I ‘ve got a billion dollars I can take a lot of risks. If I got one million, I’m probably not going to take many risks at all. So when we tax away the wealth of the richest, we tax away the most important wealth of all. That which has the highest odds of being directed towards new ideas, that while they look promising sometimes have very high odds of failure.

Hunter: You said in one of your books, I don’t have the quote with me, John. Maybe it was an article, entrepreneurs will always be able to innovate around politicians and it reminds me of another book that just came out Cato Institute called Evasive Entrepreneurs. I’m not sure I like the title but was the same sentiment. That the entrepreneur is smarter, faster and more agile than the politician. Do you have anything specific in mind when you wrote that?

John: Oh yeah. Thank you. I love that. Thank you for bringing that up. It was an April 13th column I wrote where I said that despite this political disaster that we’re enduring, whereby politicians apply command and control, we will nevertheless roar back. And my point is and the point I made in it is you, the entrepreneurs are just, this goes back to 2009 I asked a rich entrepreneur in Houston, hey what’s going to happen? Things are looking pretty bleak. And he said oh, come one. I am way too smart for Obama and I was way too smart for George W. too. These guys mean nothing to me. I can innovate or around them and I always have. And never forget with entrepreneurs they stare death in the face every day. Phil Knight, one of the greatest entrepreneurs who ever lived spent the first 18 years of Nike’s existence kind of gently telling his wife each night, oh no, we’re going to make it. And his line, his wonderful memoir Shoe Dog, I was telling her something I didn’t necessarily believe. Nike nearly died so many times. And that’s true entrepreneurs. All they know is near death, or they built a company that died, and so the idea these clowns in Washington and around the country just tragically shut down the economy. This is nothing to these guys. They’ll innovate around them. It’s what they’ve always done.

Hunter: So let me switch there and talk about your entrepreneurial journey, John. I read chapter 7 of The End Of Work. You could say your path was uncharted. In the end a little bit you talk about some painful experiences like downsizing, but you found your way to success doing something that you love. You said writing elevates your spirit. We use the journey metaphor, the entrepreneurial journey, is that a good way to think about it from your experience?

John’s Entrepreneurial Journey.

John: Thank you very much. I’m so flattered you read that chapter. I had such high hopes and still have high hopes for The End Of Work. I think the, one of the most unsung, brilliant, beautiful aspects of economic growth that it frees more and more people to specialize and do something that they can’t get enough of that doesn’t feel like work and pays them. Because entrepreneurs work for their work, and certainly I will never put myself in the same realm as, I can’t claim that what I did was Phil Knight Esq. or Jeff Bezos Esq. I’ve always been employed by someone else. I’ve never had the courage to go fully out on my own, but I have had lots of failure. I was laid off by Goldman’s Sachs during the market downturn in 2001. It was devastating. I was, it didn’t make it into the book. It was supposed to because I put it into it, and it didn’t make into the edits, but I was demoted at Forbes back in 2014. I’ve been opinions editor and got on the wrong sides of people and was put out of that job and it was just, it ripped my heart out. But each time it forced me to get better at what I did. I’ve been kicked down, nothing like what Phil Knight did or some of these other entrepreneurs but I’ve been kicked around too, and it does make you better. It’s agonizing but thank goodness we live and we get to operate in an economy where yes, precisely they can fire you and demote you. There’s also lots of opportunities to get to dust yourself off as it were and get back to work and so I’d like to think I keep learning from what I’ve done wrong and I can’t believe how lucky I am to get to write about economics. Every day, and that’s probably why I write so much. Not only do I have so much to say but I feel like I’ve been given the ultimate opportunity to say: wait, someone, people pay me to write what’s on my mind. You better believe I’m not going to skip a day then if they’re going to give me an opportunity.

Hunter: You’ve created some businesses inside of a company – you helped to create Real Clear Markets inside the Forbes empire. So there’s, entrepreneurship can occur inside big companies, in fact it’s important for it to occur inside big companies. So, you’re an entrepreneur of great fame, I think.

John: Oh, thank you.

Hunter: But you’ve also done something else which I saw as entrepreneurial, you created a very distinctive style in your writing. Now let’s try to find some adjectives that would help me describe it. Its contrarian, you say to people, yeah, get real when you talk about the fed, for example. But you also achieve a stylistic individuality with some of your sentences structures and the way you use words. So how did you develop distinctive style and become good at writing. It seems like a pretty hard thing to do.

John: Thank you. Some would say and I would agree with them, I’ve got an angry writing style. I think sometimes people think I write things funny, but I don’t think I’m a particularly funny writer. Some people have that skill. Probably the most distinctive quality to my writing is I’ve got a major chip on my shoulder. I won’t hide from it. I came into this field via fundraising, as you know from my book, for a Think Tank that didn’t think I was worthy of being a scholar there. I must admit there’s, I probably shouldn’t admit, there’s a part of me that wants to prove the people wrong that never took me seriously. So yes, I’m contrarian as can be. I think the generalized assumptions by both sides are frequently incorrect, but there’s also probably, within me there’s a need, there’s a lot of “I’ll show you” – all the people that wouldn’t give me a chance to write, who wouldn’t take me seriously. I’m going to show you.

Hunter: And that seems to me like a perfectly valid motivation within other motivations. One of the things we get mad at to follow in your footsteps there is entrepreneur bashing. I mean at the high level its envy: how can anybody be so rich despite the fact they provided great service to a fantastic number of people all over the world. Generally the pursuit of profit, profit is the devil and we get mad about that, so we try to be contrary about that attitude that seems to be out there in society.

Entrepreneurs Are Heroes.

John: Yeah, it’s a great question. I always say to people if Jeff Bezos had reached the top of his game in 1970 and became the richest man in America and maybe the world – what would have his net worth have been then? $500 million a billion? I don’t know what would qualify as richest back then, but not much more than a billion. So to that I say what a tragedy. That someone so talented can reach so few people relatively. And so now today he’s worth what, $150 billion, and that’s after the divorce. The reason he is, is because he’s touching exponentially more people with his genius around the world thanks to technological advances. Jeff Bezos is in Seattle,  but it can be as though he’s next door to people around the world. And so to me, the greater inequality the greater the progress. Because it’s just the sign that the individuals that you and I elevate are able to attach themselves to capital on the way to meeting the means of people in ways that past entrepreneurs weren’t able to come close to. So I think this needs to be discussed over and over again. I think so often free market types argue that, actually ,if you look at the gini co-efficient, they revert to their graphs and their charts and their numbers, we’re not that unequal. Oh no, we’re very unequal, and in fact we free market types, if we get our way, low taxes and zero out all the regulations, stable money all those things, inequality is going to soar. And it will be a beautiful thing. And why do we run from it? Why do we run from the process whereby brilliant minds innovate for us and transforms our living conditions for the better on the way to becoming really rich? Why that’s perceived as a bad thing is a mystery to me, and again I want to stress so much of what I say goes back to things I’ve learned from Mises. What did he say? Luxury is a historical concept. So much of this was obvious to him long ago that what the rich enjoy is just a preview of what we’ll all enjoy if the economy remains free, because what the rich enjoy they establish as venture buyers. They buy something that’s beyond the reach of everyone. They establish a market use for it at which point entrepreneurs mass produce and I just think for too long our sides run away from this. Inequality is a wonderful thing. The tragedy is when inequality is not increasing.

Hunter: Yes, yeah, and in fact another praise from Mises is that entrepreneurs are people who allocate capital to best serve the most urgent needs of consumers and they should be viewed as heroes for that.

John: As heroes and lets all, I’ve used this quote from Mises in at least 2 of my books, maybe 3, he always said that when a business goes out of business it can no longer bring damage in many instances to customers, much more particularly than I have just now. We seem to, Americans, as much as they rate the entrepreneur there’s this need within people say, the small business, oh my God, noble and great and everything. No, I think the big businesses are most noble. Do all businesses start small? Yeah, that’s a given, but there’s this view out there that somehow inequality is bad. No, no. inequality is good. It’s when people aren’t becoming unequal that they’re probably not meeting the needs of very many people.

Hunter: Yeah, in fact you wrote that the best way to help entrepreneurs in small business is to unleash the big businesses because often the big businesses are the customers and they also generate the economic ripples entrepreneurs can feed on.

John: Yeah, and to be clear there are generally no small businesses without big businesses. In a shopping mall, is there any mystery why there are anchor tenants? Yeah, the anchored tenants, the big businesses, the big global brands are what attract people to them on the way to creating a market for the small businesses next to them. Again, conservatives get all mainstream on us occasionally in weird ways and they say small businesses create all the jobs. Even if you believe that, even if you believe job creation is the purpose of the business, they’re able to create jobs precisely because for the most part they cluster around big businesses. So this need within society to noble the small, to noble the average I find very odd. I think I like the big ones. They make the small entrepreneur possible.

Hunter: Let’s pick your brain as chief marketing officer, John. We both favor a movement that would be pro economics, pro entrepreneurs, and pro innovation. We want everybody to be an entrepreneur whether working for a big corporation or a small corporation. We want to have them do that as oppose to be bureaucrats. If you were the chief marketing officer for that movement where would you start tomorrow?

Happy Things.

John: I would start with happy things. I’ve never understood why some in the conservative libertarian movement, they begin with well, if we don’t cut spending we’re going to hit, we’re going to be the Titanic hitting the iceberg. And if we don’t do this, if we don’t get those deficits under control this is going to happen, and Americans aren’t…..the birth rate is not high enough. Talk about the good things. My problem with government spending isn’t deficit. I don’t care about deficits. Let’s ask ourselves the basic question, in the next ten years, which scenario is better? $50 trillion in total government federal spending where all, quote, balance, or $25 trillion in total federal spending after it’s borrowed. I’ll take the deficit scenario any day of the week. The problem is all the money being spent by politicians. Because every dollar that gets to congress means it’s an extra dollar of control Nancy Pelosi and Mitch McConnell and Chuck Schumer and Kevin McCarthy and Barack Obama and Donald Trump have over the economy. So the focus should be on limiting on how much they spend. Don’t worry about how they get it. Limiting how much they spend. And the idea with that is every dollar that remains in the private sector has better odds for entrepreneurs. Less government spending, more Jeff Bezos and more Steve Jobs, because these guys are the odd bods. And so we have to ask the question, we ask it positively. How many great entrepreneurial concepts that will give us new innovations and new forms of transportation –  make flight seem yesteryear. How many will miss out on if government consumes so much of the precious resources it starves the private sector? So I think the focus should always be: do you love Amazon, do you love your Apple iPhone, do you like your Nike shoes? Yes, we all do, and so wouldn’t we like multiples of Steve Jobs, multiples of Jeff Bezos]? Yes, I think we all would. Imagine our standards. Although the only way to get to that point is to match more and more talented driven people with capital. The only way to get to that is to shrink the burden of government. To shrink the taxation. All those things that limit the ability of wealth producers to direct their wealth to future wealth creators.

Hunter: Good, well happy is a good, a good method, good theme for marketing of economics. John, I wanted to thank you for joining us today and I wanted to thank you for your immense productivity in getting this happy message out. You’re incredibly high output when you look at all the articles and the book the podcasts and the webinars and so on like that. You’re getting involved and we thank you very much for who you are.

John: Well, thank you, Hunter, so much. Honestly it was so flattering, getting an email from you. It’s a great show. How lucky am I to have people who are actually interested in what I have to say? So I’ve been thrilled to come on and again, I just feel really lucky to be able to do what I do and so it’s, there’s immense joy in what I do, and that’s, if I can leave it there as I argue in the End Of Work, my 3rd book, the greatest gift of economic growth is freedom from work we despise. I’m so lucky to do what I do. I couldn’t not do it. It would cost a lot of money to get me to not do it because I enjoy it so much and maybe this is the greatest argument for the things we believe, again, freedom from work we hate. So I’ll leave it there. Thank you so much.

Hunter: Thank you, John. See you soon I hope.

John: Yes, please.

66. John Tamny On America’s Uniquely Productive Entrepreneurial Flywheel

The flywheel is a robust and powerful mechanism so long as restrictive regulation by government and failures of imagination by capitalists do not slow it down.

John Tamny speaks articulately with Hunter Hastings about the uniquely American entrepreneurial flywheel in Economics For Entrepreneurs podcast #66.

Key Takeaways and Actionable Insights

A growth business is what John Rossman, in episode #50, termed a flywheel. Using amazon.com as an example, he gave us this simple image.

Flywheel Economy Diagram

The flywheel looks simple, but in reality it’s quite nuanced. Lower prices and a great customer experience will bring customers in, Bezos reasoned. High traffic will lead to higher sales numbers, which will draw in more third-party, commission-paying sellers. Each additional seller will allow Amazon to get more out of fixed costs like fulfillment centers and the servers needed to run the website. This greater efficiency will then enable it to lower prices further. More sellers will also lead to better selection. All of these effects will come full circle back to a better customer experience.

John Tamny sees the American entrepreneurial economy as a beautiful and productive flywheel.

Why are Americans so entrepreneurially focused? We descend from “the crazies” – the other thinkers who came from around the world, dissatisfied with their lives, and willing to cross oceans and borders to get to a place that offers no security but offers freedom. They took the ultimate entrepreneurial leap. We got the nut cases. Steve Jobs, for example, was of Syrian descent. Could he have started Apple in Syria? No.

John Tamny's Entrepreneurial Flywheel

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Entrepreneurs lead us to a better place.

John’s definition of an entrepreneur is someone who has a vision that everyone else thinks is ridiculous, yet they follow it anyway. They have no time for the way things are done today. They want something different. And to win consumer acceptance, what’s different must also be better. So they quite literally lead us to a better place. Horse-drawn carriages weren’t enough, so Henry Ford gave people something different. Everyone wanted Blackberry phones when Steve Jobs brought out the iPhone, and he quickly demonstrated its superiority. Every entrepreneurial act is speculation – there is never certainty that people are going to want the new product. That’s what is so important about entrepreneurs.

Entrepreneurs need to attract intrepid finance and intrepid financiers.

Silicon Valley is littered with VC’s who turned down Facebook, and turned down Amazon. Founding entrepreneurs think differently and have a vision that is far out of the norm, and they need to be matched with financiers who can be strong supporters and collaborators on the path to a better place. Irrespective of whether it is from Wall Street or Sand Hill Road, or from visionary friends and family, it’s critically important that we figure out a way to get financing to brilliant people. Government restrictions on entrepreneurial activity are certainly barriers to growth, but so is failure of imagination on the part of capitalists.

Intrepid lending takes place far away from banks. Unspent wealth is the source, and the more unspent wealth one person has, the more risks they can take.

We tend to complain about the antiquated and sclerotic banking system, but it has nothing to do with entrepreneurs and innovation. Banks make loans to entities they know will pay them back. Entrepreneurs fail 90% of the time. Banks want nothing to do with innovation.

Those with unspent wealth are the most crucial people in the economy when they match their unspent wealth with entrepreneurial talent and vision. The more unspent wealth they have – and the less the government takes away from them in taxes – the more intrepid they can be in investing it. When we tax away the wealth if the richest, we tax away the most important wealth of all. – that which has the highest odds of being directed towards new ideas that, while they look promising, have high odds of failure.

More and more of us have the opportunity to become entrepreneurs, if we harness the flywheel of original ideas that attract intrepid capital.

One of John’s many books, The End Of Work, describes how we are all now so enabled with interconnectivity to resources that we have the chance to make money by doing what we love. Our passion can become our job. If we are able to imagine a future place that is better – that improves the lives of individuals – we can create a growing business. The more of us who can do this, the more we grow the whole economy – which, after all, is made up of individuals. If we can also attract that intrepid capital that John refers to, growth becomes faster and higher.

Besides The End Of Work: Why Your Passion Can Become Your Job, John’s books include Popular Economics: What The Rolling Stones, Downton Abbey and LeBron James Can Teach You About Economics, and Who Needs The Fed: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America’s Central Bank.

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65. David Bienstock on the Business of Politics

When we talk about entrepreneurial alertness to opportunity, it can sound pretty vague. What exactly does that mean? How is alertness translated into profitable action?

Key Takeaways and Actionable Insights

This week’s guest, David Bienstock, provided us with a very precise example. He had just started his media buying services business when a phone call came in. Do you provide service in the category of political advertising? David’s answer was yes. There was no reason for it to be otherwise because there was no information at the time that would indicate any differences between media buying services in the political advertising category compared to the commercial advertising category.

He was able to transfer existing knowledge from his expertise in media buying and placement, and also develop more and more new knowledge. He thereby identified more and more ways in which political advertising was specialized — factors of timing, competitiveness, geography, pricing, regulation, and many more. David built his own island of specialization and became the foremost expert in a burgeoning field.

What can we learn from following David’s entrepreneurial journey?

David Bienstock's Entrepreneurial Journey

1) The alertness we talk about that entrepreneurs display to opportunities can be triggered by the smallest piece of data. For David, it was one phone call. His instantaneously positive and open response led to a long and successful journey.

2) Wherever there is business expenditure there is an opportunity for an entrepreneurial business service. The business we discussed in episode #65 is campaigning — political, public affairs, ballot measures. How much is spent on campaigns? A lot. There’s the opportunity.

3) The best entrepreneurial businesses are often the ones that clients put you into. David’s inbound phone call was a new client stating an unmet need. That’s all the invitation the alert entrepreneur requires.

4) Opportunities, once seized, expand. David has expanded his original business by adding many related services for current clients to utilize, including multi-channel media, market research and analytics. In addition, he has added multiple new businesses in related spaces. He’s been creative, he’s taken action, he’s been constantly looking for new opportunities that are complementary to the first one that he spotted. However small the start, the next steps will quickly become apparent to the entrepreneur who is not only alert to opportunity but also to expansion and growth.

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64. Per Bylund: Avoid The Errors of UNtrepreneurship.

Per Bylund warns us that there is some entrepreneurial advice and some proposed business models that are misleading. They amount to what he calls UNtrepreneurship – a bad business direction to take. He defines the standard of the Austrian entrepreneurial business model and highlights the business risks that lurk on some other pathways in Economics For Entrepreneurs podcast #64.

Key Takeaways and Actionable Insights

Follow the guidance of the Austrian Business Model.

The entrepreneurial business model is built on a set of important economic principles. Wandering away from the entrepreneurial pathway can lead to errors that Per Bylund christened UNtrepreneurship.

Focus on serving consumers and customers.

The purpose of a business is to create and keep a customer. It’s a demanding task, because customer needs are continuously evolving and changing, and competing entrepreneurs are vying for their dollars. It is critical to maintain intense focus on service to customers.

There is a lot of distracting entrepreneurial advice. You might encounter instructions to “identify and exploit market gaps” or to “seize opportunities”, for example. But there are no such things as gaps to fill or opportunities to grab. The language makes it sound like these are objective phenomena, unmasked by analytics. They’re not. The right strategic platform for entrepreneurs is to focus on serving customers by identifying their preferences and meeting them.

Every hour you spend, every strategic thought you develop, should be focused on the customer.

Productivity lies in returns on customer satisfaction.

You’ll hear a lot of talk of generating returns, especially on funds invested by lenders or VC’s. These returns are emergent outcomes of other activities. Even profit is an indirect outcome more than it is a goal.

Ludwig von Mises wrote in Human Action that the task of the entrepreneur is to use capital “to the best possible satisfaction of consumers”. Anything else “hurts people’s well-being”. Customer sovereignty, in the language of economics, means that the customer decides, by buying or not buying, what will be the return to the entrepreneur on their investments of time, effort and money. Productivity results from the most efficient assembly and combination of resources to produce customer satisfaction.

Sometimes, business literature and business practice can deviate from this standard. Often, for example, the pursuit of “scaling” – making a firm big, in numbers of employees, say, or number of transactions, as fast as possible – can divert resources from serving customers to serving the needs of infrastructure growth and bureaucracy. Customer satisfaction should be the only focus.

Understand subjective value.

The economic concept of value is challenging to master for entrepreneurs. Value is an experience in the customer’s mind. We’ve also identified that it’s a process – a learning process customers initiate and actively conduct to make a decision as to whether an offering has potential value (“I might like it”), relative value (“I think I might feel better about buying X versus Y”), exchange value (“I am willing to pay Z dollars at this point in time to acquire X”), experience value (“my satisfaction was more / less / the same as I expected”) and assessed value (“looking back on it, my value experience was worthwhile and worth repeating unless something with more potential value is offered to me”). All through this cycle, the customer is active in the marketplace, learning about alternative offers, changing their consumption preferences, interacting with other people with different experiences and preferences that might be influential, receiving advertising messages, and generally rearranging their personal value recipe.

It’s a challenge to understand and a challenge to keep up. An entrepreneur’s understanding of subjective value is a critical business success component. Importantly, the business school concept of “creating value” can be unhelpful. Value is created by the customer. The role of the entrepreneur is to understand how to fit in to the customer’s life and contribute to it, making possible (“facilitating”) the mental experience we call value.

View pricing as a discovery process, not as an expression of market power.

Another challenge of the economic way of thinking to conventional business writing is the understanding of prices. Prices are emergent market signals, ultimately determined by the consumer’s willingness to pay. Prices can’t be “set” by the entrepreneur. There is no “pricing power”. Margins can not be calculated by determining the price you want to sell at and then subtracting the costs you have imposed on yourself.

Entrepreneurs discover prices – the market reveals them. Attempts to use pricing as leverage to grow market share irrespective of costs and profits are doomed to failure if it is later discovered that customers become conditioned to the artificially low prices and resist returning to a higher price.

Follow the entrepreneurial ethic.

Per Bylund has emphasized that there is an entrepreneurial ethic that applies. Entrepreneurship is the service of meeting customer needs. Profit emerges as a result of successfully accomplishing this task. Profit is necessary to maintain the service, but it’s not necessarily the primary goal. In some ways, entrepreneurship is a calling. There are social and emotional benefits for taking on the role of the entrepreneur – we can classify them as psychic profit. There is purpose and meaning in the entrepreneurial life.

This should not be confused with the misguided economics of so-called social entrepreneurship or impact entrepreneurship: attempting to rearrange and redistribute resources in society through the active application of the entrepreneur’s personal preferences. Only the customer’s preferences in the marketplace can direct the best allocation of resources. The entrepreneurial ethic is to follow and serve.

Our Free E4E Knowledge Graphic summarizes these precepts – keep it on your device for reference.

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“Avoiding The Errors of UN-trepreneurship”: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

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