Why?

Why bother launching a new business? One day, suddenly the idea came to me. When shopping on Amazon, I noticed that the price of a book can fluctuate wildly from one day to the next. The price could be $12.99 one day, and free the next.

Who has time to check the price every day? Wouldn’t it be great if there were a way to be notified when the book is on sale? That was the idea. And then I created the site.

If you are interested, you can check it out at Librosso.com. I would love to hear your feedback about how the service can be improved.

After launching the site, I began thinking about the different steps to business success. And that there is only one way to get from one step to the next: Action.

The Value of Action

It always amuses me when people talk about their bright idea like it is a valuable asset. Everybody has great ideas. But 99.99% of the time they don’t do anything about it.

So I came up with the 6 Stages for Business Success

1. Idea
2. Validation
3. Development
4. Launch
5. Growth
6. Success

1. Idea

As I mentioned before, everyone has an idea. But ideas are a dime a dozen. In my experience, the value that a person gives to their idea is in direct proportion to the probability that they will not take any action.

That’s right. When someone thinks their idea is so great that they are reluctant to share it, it usually means that they won’t ever go anywhere with it (or any other of their ideas).

2. Validation

This is where the idea is analyzed and you have to figure out it can be turned into a viable business. Would anyone really use it? How much do you charge? What are the technological or other challenges?

Part of the validation process is to define exactly what the product/service is. And define the scope of Version 1, the MVP (Minimum Viable Product). Once you decide that the business is worth doing, and you have defined it precisely, we can go to step 3.

3. Development

This is where the rubber meets the road. The money is spent, people are hired and the business becomes real. At this point challenges such as technical and financial problems will often rear their ugly head.

Yet in many ways this is the easiest step. I often find that I want to choose between 2 options during this phase. Usually the answer is “I’ll worry about that later because it is not critical to solve now.”

4. Launch

This is probably the most exciting point of the process. I feel like launching a business is like giving life to a baby. You’re not really sure how things will turn out, but your head is full of dreams an hopes.

5. Growth

This is when you have to examine your business in the hard light of day. And this is where the real work comes in. You have to handle sticky issues like getting visitors, shipping products and managing employees.

It is also the point where most businesses fail or pivot. When the business is put to the true test, we find out how great our idea really is. Does anyone even want to buy it? Are they willing to pay money for it?

6. Success

If the business can generate enough revenue to get through its initial growth stages, and does not make any catastrophic strategy errors, then it is on the path to success. Most people think that once they reach the Success stage they will be totally happy.

But nothing could be further from the truth. This is where the big problems occur. And this is the point where many entrepreneurs fail. What will you do if you get sued and the existence of you whole business is threatened? What will you do if the market changes and the demand for you product disappears? How will you transition from an entrepreneur building a startup to the CEO of a medium sized business?

So, those are the stages. Everyone wants to get to Stage 6, but most stay at Stage 1. Action and perseverance are the only tools necessary to get to Stage 6.

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Big Pharma Game

As I played, I started wondering if this experience is similar to what it is really like to being the CEO of a real pharmaceutical company. I imagined that much of it is quite similar…perhaps if you removed all the boring meetings and time wasted dealing with lawyers.

Then I started thinking how figuring out how to succeed in the game is very similar to figuring out how to succeed in real life. Try different things out, set up goals, develop strategies, do research, etc. I wondered how the developer created such an engrossing and interesting game.

On his blog, there are many hints of success in the development of the game. It was also interesting to note the reasons that his previous game did not do well.

One big learning is that you have to know how to market your product. It doesn’t matter how great your product is – without marketing nobody will know about it or use it. In the case of computer games, marketing is largely done by 3rd party YouTube game reviewers. If you can get these reviewers to enjoy and value your game, millions of would-be customers will find out about it.

Another key learning is to manage the initial experience. If your new users cannot understand and enjoy the game right away, they will not invest the time and energy to get into it. Specifically, this means that you need to create a tutorial that works well for new users. It took three iterations of the tutorial to get it right. FWIW, the tutorial worked for me and I quickly got hooked.

For people who are not familiar with game development, the tutorial may seem like an insignificant detail. But nothing could be farther from the truth. Without a great tutorial the game has little chance of success. Furthermore, if you study some of the most successful games in recent years, most of them had great tutorials.

The point of this whole post is that success is not an accident. Designing a successful game is not different from designing a successful business. Part of the magic is to look beneath the surface and dig deep into the details. It’s the interaction of many tiny details that separates a smash hit from a forgotten game.

The post Lessons Learned from Big Pharma – The Game appeared first on The Online Investing AI Blog.

Rich Dad’s Cashflow Game

Perhaps it is because of the high price of the board game. When I last checked it cost over $100, compared to perhaps $20 for most board games. Does the Rich Dad game cost more to produce? No, it costs more because it is worth more.

So maybe the post is so popular because millions of people want to buy the game but they don’t want to pay for it. It seems that wanting to get something for free is a very common goal in the U.S. I guess it is a desire for people throughout the world.

Ultimately for most people, the desire to get something for free is generated from a belief in scarcity. Most people think that they don’t have enough money, so they don’t want to pay for things. They believe that people like Zuckerberg or Tony Hsieh are blessed with luck.

I would argue quite the opposite. I suggest that Zuckerberg and Hsieh are blessed with beliefs that generated their massive wealth. This has been described as another kind of luck: Laboring Under Correct Knowledge. They simply know how to follow through, succeed and become wealthy.

The reason that everyone is not as lucky as Zuckerberg or Hsieh is that they are loser. That is, Laboring On Spurious and Erroneous Reasons. And one of these reasons is the belief that money is limited.

So, what is the solution? One good idea is to choose our beliefs, instead of adopting the beliefs of the people around us. There is a common perception that it is difficult to change our beliefs, but it turns out it is very easy, if you know how to do it. That will be the subject of a future post.

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It seems that we are entering a decisive period for the stock market. The S&P 500 is right at the top of a channel between 2,100 and 1,920. Although I don’t like technical analysis, it is pretty clear that if it rises significantly about 2,100, then a new bull market will start. Conversely, if it drops below 1,920 a major market crash may follow.

S&P 500 10 Year Chart

Although anyone with limited knowledge of technical analysis would come to the same conclusion, I imagine 100,000,000 would-be retirees don’t look at this chart. And even if they did, they would not be able to see its importance.

I have been studying the S&P 500 on a daily basis for the last few years, and noticed a few interesting distinctions. One such distinction is that I don’t think it is possible for anyone to make accurate predictions such as:

In November 2016, the stock market will crash.

There are too many variables. However, when a market goes straight up like the Dot-com Bubble, or the Shanghai composite 2014-2015, it’s very likely that there will be a crash. You just don’t know when.

The major distinction I made is that although we don’t know when the crash will happen, we can predict two important pieces of information:

1. What is the probability of a crash?
2. If it does crash, how much it would go down?

The higher it goes and the shorter period of time, the higher the probability of crash. And, the higher it goes and the shorter the period, the more it will go down.

As you can see, the scale of the last 5 year bull market has been much smaller than the other two bubbles. So that suggests that a violent market crash may not occur.

It will be interesting to see how this market mystery turns out. I hope that the millions of people who would be affected by a market crash become aware of the possibility.

The post The Next Stock Market Collapse: Are we There Yet? appeared first on The Online Investing AI Blog.

Virtually no one is focussed on the real problem. The country is bankrupt. Does it really make sense for Clinton and Sanders to deliver on their promises if they will make the country’s finances even worse? Trump does not provide details or a plausible plan either, probably because he knows that if he did large numbers of people would not like it.

Chart courtesy of ShadowStats

Nobody talks about QE Infinity or the inflation that has been accelerating over the last decades. Nobody cares that the country is bankrupt or that the party is followed immediately by major financial upheaval.

The longer the party goes on, the worse the hangover.

While the government presents the financial propaganda that inflation is low, it’s pretty clear to me that inflation is not low. Living in Los Angeles, I have seen prices rise much more quickly than the 1% that the government claims. The same is true for large cities across the country. Housing prices have far outpaced wages, and so has pretty much everything else.

DBC Commodities Index

The only prices that have been falling is the price of commodities. Oil and many other commodities have been falling since 2009. This has prevented a huge jump in inflation. In the 70’s interest rates hit 20%, and they will go much higher when he have another high interest rate climate.

The whole point of this post is that while people are distracted by the circus of the election, their wealth has been quietly and systematically stolen by governments. By distorting the economy through monetary policy, they transfer wealth from the many to the few. And since the many are too busy watching TV, they have no idea of the theft that has been happening for decades.

The post Inflation: The Silent Killer of 2016 appeared first on The Online Investing AI Blog.

US Debt Keeps Growing

Unfortunately, this is only a small part of the country’s unfunded liabilities. When you add Medicare and Social Security, the total is about $100 trillion. Many people believe that this is too much for the country to pay off, and that we will never be able to pay it.

How did this happen?

As I have mentioned before, most of the politicians that have run this country for the last 50+ years have not been fiscally responsible. They treat budget spending the same way a teenager uses a credit card. Am I saying that they are bad people?

No. I am just saying that they do not have the skills or inclination to fix the budget problem. They don’t know how to manage money or a business. Even if they did promise to fix the problem, they would never be voted into office. They would have to make massive cuts to Social Security, Medicare, military spending and every other area that people are not willing to cut. The people who depend on all this excessive spending would have to vote for the politician, and they would never do it.

Enter Donald Trump. Although there are many things that are not great about Trump’s proposals, I think that he has the potential to fix problems like this. He’s not a politician. He has so much money and power that he doesn’t have to play politics. And, his confrontational personality seems to be the incompatible with the political process of trading favors.

The post Can Trump Defuse the US Debt Bomb? appeared first on The Online Investing AI Blog.

Real estate always goes up.

It’s pretty obvious now that is a lie. But it works for them. The clueless would-be investors that believed them bought up properties like there is no tomorrow. And for them, there wasn’t much of a tomorrow. Most of the properties went into foreclosure and were repurchased by more savvy investors.

Shanghai Composite Index 2011 – 2016

It is clear from looking at this chart that the Shanghai market was in a bubble. But for most people it is only obvious in retrospect. Markets have been bubbling and busting since they were first invented thousands of years ago.

Now that most markets have recovered completely from their 2008 lows, it seems that we may be on the verge of the real collapse. As I mentioned in a recent post about the possible impending Financial Crisis, many people think that 2008 was just a small preview of the financial chaos that will soon engulf the world.

In fact, market crashes often have a short-lived steep selloff right before the crash. I think this is part of the group psychology of a market crash. During the 2008 crash, many people did not sell. They waited until the markets were down so low that it was too painful for them to sell.

But this time it’s different. The pain of the 2008 crash is fresh in everyone’s mind. And, there are tens of millions of retirees in the US alone that are going to be quick to pull their money out of the stock market as it declines. They were nearly wiped out a few short years ago, and they will be sure to not get wiped out this time.

Can anyone predict with certainty what will happen in the markets in the future? Absolutely not. But individual investors can get educated and learn basic concepts like “Markets go up and markets go down.”

The post Markets go Up and Markets go Down appeared first on The Online Investing AI Blog.

Well, to put is nicely, the food sucked. It was cold and unappealing.

I contacted their customer service and expected a prompt refund and a note saying, “Sorry you didn’t like it. Please give us another chance.”

But no. They said, “No, you can’t have a refund.” So they would rather have my $26 than a happy customer.

I found two things interesting about this experience. The days of caveat emptor seem so long ago. After my many positive experiences with Amazon, Zappos and Progressive Insurance, it seemed that the practice of abusing your customer was coming to an end. But I guess not. I was just getting used to the wonderful customer service of a few companies.

Does treating your customer right pay off? I think so. I made 139 orders from Amazon in last year alone. I haven’t added up the total, but the vast majority of my shopping happens on Amazon. Is it because they have the lowest prices? No. Is it because they have great customer service? Not really.

Ultimately it boils down to how we feel about the company. If we have positive emotions about the company, then we will naturally choose to shop there. We don’t even need to think about it. Our favorite companies become the go-to default choice. As soon as we decide to shop for something, the first place we check is that company’s site.

It’s interesting to note that our positive feelings make us find reasons to buy from our favorite companies, even when we wouldn’t normally do it. Recently I decided to get a new computer. Newegg has good service, great prices, great reviews and is great for buying individual components. In fact, it is better for computer components than Amazon because the customer base is more technical and the reviews are more helpful.

So you would expect me to go to Newegg to get the computer, right? No, I chose Amazon. Because Amazon had built up so much good will. Because Amazon had made so many deposits into our energy bank account (as described by Steven Covey), or, as the kids say, street cred.

In fact, I have so much good will towards Amazon, that I set a goal of making 150 orders this year. I plan on making 0 orders from the crappy food delivery service.

So, that’s the story of the good company vs. the bad company. Will one company succeed and the other company fail? I hope so. But I can only do my small part, of making 150 orders this year.

The post Contempt of Customer appeared first on The Online Investing AI Blog.

Markets top slowly and bottom quickly.

When I read this and anlyzed some of the major market tops over the last 100 years, I was surprised by the accuracy of this statement. (One major exception was the 2000 Tech Bubble, which was quite different from other market dynamics.)

S&P 500 Jan 2011 – 2016

The theory behind this is that the “smart money” figures out that a market is topping long before the average Joe. I’m not sure if I agree with the theory, but it does seem to me that the “stupid money” gets out way too late, after the market has dropped significantly.

As I write this on Jan 17, 2016, it reminds me of the would-be retirees in 2009 lamenting,

My 401K is down so much that I don’t even open my statements anymore.

I wonder how many have the sense to protect their life savings today. Probably not very many. Probably about as many that take the time to become financially educated and read books about trading and investing. This reminds me of the Foreclosure Crisis that I wrote about just a few short years ago.

What would cause a market crash now? I think the biggest reason is that we are overdue for a worldwide depression. Depressions happen once every 80 years, on average. The last Great Depression started in 1929, which was 87 years ago.

Another major cause of any upcoming financial crisis is the Chinese economy and stock market. The Shanghai market had a bubble and collapse last year, and is set up for another big fall:

Shanghai Composite Index Jan 2014 – Jan 2016

This situation reminds me of something a friend of mine said in 1999. He said he would like to buy puts against the Nasdaq. If he had, he would have easily made a 10x in a few months.

Does that sound incredible? Making 10x in a few months, when most people are making 1% per year (before inflation)? It is incredible for those of us who don’t understand how markets work. But it is very doable for people who are experienced traders and can see opportunity in the form of a chart.

The post Are you Ready for the Financial Crisis? appeared first on The Online Investing AI Blog.

One thing that is funny about New Years Resolutions is that most people have them. And 99% of the time they have completely forgotten all about them by spring. This useless goal setting system is completely broken. Yes nearly all people use it. Then they lament that they “failed” in following through.

The #1 New Years Resolution is going to the gym. I wish I owned some gyms. Perhaps 95% to 98% of the members never go. And those that do go only use it a few times per month. Ever wonder my gym membership is so cheap? Because the cheaper it is the easier it is to lie to ourselves.

I don’t want to cancel it because I am going to try to start going.

I wonder why people think it is such a great idea to get drunk and party on New Years Eve. Why? What’s so great about it? It’s just another year that went by. Did you achieve your goals? Did you get rich? Did you even go to the gym? If I answered no to those questions, then I wouldn’t be partying. I would be pondering.

I think the worst thing about New Years Eve parties is that they set people up for another lost year. What worse way to wake up than hung over, drugged out and tired? How can you start out the new year by going to the gym or setting goals when your brain is damaged?

Recently I have been thinking that a big part of being successful is just being different from average.

Did you watch Star Wars?

No. What’s that?

Did you get liquored up on New Years?

No. I don’t go out at night. I stay home and work on my future.

Did you watch the new season of Whatever on Netflix?

No. I don’t watch that.

If people spent half of the time, energy and money that they spend on TV and other useless mass-media garbage, they would be rich, happy and successful.

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