Today we’re looking at The Self-Made Billionaire Effect by John Sviokla & Mitch Cohen—how extreme producers create massive value. Pretty good title right? Though it’s very catchy with words like “billionaire,” “extreme,” and “massive,” there’s one word in here that means more than its face value, and that’s “producers.”
So, first let’s take a little marketing lesson from the attention-grabbing nature of the title. Then, let’s talk about how this book says there are two kinds of people in the world—producers and performers. We’ll get more into how the authors define these and what it means for you, but I’ll just say that, in the language that I’m used to speaking, producers are entrepreneurs, and performers are employees.
But, before we get into more detail on that, let’s look at a quote from the book. Howard Aiken said “don’t worry about people stealing an idea. If it’s original, you will have to ram it down their throats.” In other words, you don’t even want an original idea! Maybe that’s taking it a little too far, but he’s trying to remove the fear that a lot of people have around their “billion-dollar idea.”
Tai Lopez puts this in perspective as well when he says that if someone can steal your idea and your entire business strategy just from you uttering one sentence, then it would have happened once you launched the business anyway. Now, if you have some real intellectual property that you’ve developed, then by all means protect it. But, don’t worry about missing out before you’ve even started something.
So, let’s look at what we’ll talk about today. We’re going to cover three golden nuggets: 1) We’ll get into more detail on the producers and performers, how to identify them, and how you can benefit from understanding the difference, 2) We’ll talk about the concept of “eat what you kill,” which has to do with rewarding people according to the value they add, and 3) there’s a fascinating concept called “prospect theory” that can help a lot of people get over the fear of big decisions like leaping from employee to entrepreneur!
Starting with producers and performers. My compartmentalization of them as entrepreneurs and employees is a bit oversimplified, and here’s how the book talks about them:
Producers “envision something new, bring together the people and the resources to create it, and sell it to customers who didn’t know they needed it.”
Performers “are talented people who excel at optimizing within known systems. They are often very good at what they do. But they are celebrated and elevated precisely because they perform so well in one arena.”
Now, these aren’t out of the book, but I think of the differences between the two with three opposites:
Producers generally have more broad knowledge, so they are able to see relationships and make connections, but performers have the deep level of knowledge in a specific area to make them true experts.
Producers are able to step back and see the overall vision of they have for their organization, but performers are necessary to execute day in and day out to achieve that vision.
Producers are better at developing strategies to achieve goals, but performers develop the ideal tactics to drive towards them.
We need to recognize that we are all producers AND performers, but we probably fall closer to one end of the spectrum. What will help you the most is to be aware of your own strengths and play to them. You can bring up your weaknesses enough so you don’t get in trouble, but you can also learn where you might be better off finding a partner or employee.
The concept “eat what you kill” wasn’t all that abstract a few hundred years ago. Before grocery stores and fine dining, if you didn’t hunt, you didn’t eat! Except for berries and nuts and such, but you get my point.
In business, this is now most associated with salespeople. They’re paid on commission, which means that they get a percentage (or sometimes a flat amount) of every sale they make. Now-a-days salespeople also receive a base salary usually, but their compensation will vary a lot based on how well they perform. If they sell nothing they don’t make much, and my mentor Bill, who’s a CFO, used to say that he wanted the salespeople to make more than him, because that meant the business would profit and he’d be in good shape in the end. What’s the old saying? “A rising tide lifts all boats.”
The idea here is to compensate people based on the value they add to the business. If done properly, the business will succeed, because if someone made $50K, it’s because they added $100K to the business for example.
The problem is that this isn’t always easy. With salespeople, it’s generally clear the value they’re adding to the business, because it’s measured in dollars sold. But what about a business development person? Or worse yet, an accountant? What about a research and development scientist? While it’s not always easy, good management creates metrics to measure the value each individual is adding to the business, so employees are incentivized to add more.
The final golden nugget is a really neat one called prospect theory. Nobel Prize winners Daniel Kahneman and Amos Tversky came up with this theory to describe the subjective nature of risk. Basically, the theory argues that individual perception of risk depends on how an opportunity is framed, the context, personal experience, and other factors.
One of the key ideas that this theory introduced is called loss aversion, which says that people are more afraid of losing what they have than they are eager to gain something new. This is illustrated amazingly by people I’ve met who aren’t happy in their jobs, but they don’t want to change careers, because they would have to take a pay cut.
Even when I phrase it to them as “so you’d rather make $10K per year more for the next couple of years than do something that you think will make you happy?” it seems like too big of a risk. This is loss aversion. Usually, the fear of the unknown and losing what we’re comfortable with seems like too high a risk.
Here’s how you can beat this sad limitation of our brain: Jeff Bezos was making six figures when he was considering starting Amazon. He knew he wouldn’t make much money initially, so he would be sacrificing hundreds of thousands of dollars AND borrowing some money from his parents. The way he got over loss aversion was the fear of regret.
He figured he could always get another job and pay back his parents and make more money, but, when he was old and gray, he would look back and know that he went after his dreams. I try to take calculated risks, but if the math checks out, and I’m still afraid for some reason, I use what I’ll call the old person theory: When we’re 80 years old, we’re not going to care if our house is 3 bedroom instead of 4 or our car goes 150 not 200. We’re going to care about what we went after in life and the experiences and memories we created.
And that’s the summary for today. Don’t get caught always thinking that the grass is greener, but if you truly think you’ll be happier doing something else, you have to be willing to take the leap.
Here are the exercises for today: 1) What % are you producer and performer? 2) Are you compensated based on your value? Could you be? And 3) What will you regret if you don’t do it out of fear?
I want you all to think about that. I know I do. It’s not the things we do that we regret. Everyone does some stupid stuff in his or her life. It’s the stuff that we DON’T do, and we wish we had, that haunts us at the end of days. So take a risk, and take a leap, and I’ll see you next time!