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by • May 15, 2012 • ProductComments (2)85

When muses can work and why they will break you

I love the goal of Muse businesses (pay for your life without taking your time)[1], but become extremely worried when I hear someone say they are going to start one.

Here’s the problem:

Without significant development resources, the muse seems only to work[2] for two types of businesses: drop-shipping and gadget innovations[3][4].

Drop shipping

Drop-shipping means you sell someone else’s products as your own (while having them do the hard work of delivering it). It’s a great fit for a muse because you don’t need to actually stock products, collect orders, or lick stamps. But the product is–by definition–commoditised. Anyone else could sell it from the same drop-shipper if they so chose.

Your edge, then, must come not from what you’re selling, but from who your’e selling to. The two basic ways you carve out a unique audience is through either your marketing message or your marketing location.

Regarding location: horizontally striped, long sleeve t-shirts are common in France and rare in America. If you notice that, and start selling these shirts to Americans, you can do well. Ad arbitrage is basically the same if we pretend search terms are countries[5].

On the messaging side: bird cages are a commodity. But if you call the bird cage a “parrot cage”, parrot owners will irresistibly flock[6] to it. And since parrots cost 5-10x more than your average bird, your margins will completely dominate those of other folks selling the same product to regular bird owners.

Gadget innovations

Gardget innovations are basically anything you would find in Kickstarter’s design hall of fame. One of Tim’s examples was a big yoga mat, which is really a good idea. We get to choose the size of our coffees and our happy meals and our mattresses–why not our yoga mats?

In marketing terms, this basically has the same effect as coming up with some way of making the existing yoga mat seem “better”. It’s lets you either make better margins or re-sell your product to people who have already bought one of the old, “worse” ones. Both are good!

You and your muse and success and heartbreak

So how do we make a muse? And in the failure case, what causes it to go wrong and lead to heartbreak?

Well, I don’t really know how to make a successful one. We can point at success cases, but is that a repeatable path?

I think one way is to just work normally, like you would on a startup, with an eye on automation, and then call it “enough”. But be ready to put in plenty of programming time to figure it out. The other way is to follow what works. Go with drop-shipping or gadget innovations. Use kick-starter. Use marketing. Don’t reinvent the wheel.

Overall, I think it’s hard. Making money on the internet is hard. But maybe by identifying and avoiding the major failure cases, we can bring ourselves closer to success.

The heartbreak that I’ve seen has come from one of two places.

The first source of disaster is believing that because your ambitions are modest, the path there is simple. From believing that since you only need to make “just a thousand bucks a month”, you can skip over all the learning and just put a little idea on the internet and rake it in. This leads to budgeting enough for version 1 and then not having enough for versions 2 and 3 and 4 and 5.

The second source of heartbreak is from working on ideas which seem simple but which rely on scale before they’re effective. Instagram looks simple, but is a terrible fit for being a muse, because it’s in an all-or-nothing space and needs huge scale to make any money. A better craigslist/gumtree seems simple to build and profitable, but it has huge network effects that you need to slog through and overcome. A non-Zynga draw-something feels appealing, but you either don’t have the viral loop and get 0 users, or you get the loop going and then have 100mm users and need a 50 person team to keep the servers up.

The first mistake winds up as rolling the dice (at 5 grand per roll). The second mistake turns into an all-or-nothing where your whole goal for starting the company dooms it to be a “nothing”.

[1] As introduced by Tim Ferris in The 4 Hour Work Week.

[2] I generally avoid sweeping internet ultimatums since it’s just cruising for a bruising by counter-example, but in this case I’ll let it stand (since I’d quite like to find out I’m wrong here).

[3] I’ve also heard of someone making a living off adwords arbitrage, so I’m going to dig in to the first two and then argue that ad arbitrage and other variants fall under the same umbrella.

[4] I’m beginning to suspect that the footnotes are going to be longer than the article.

[5] A tidy argument, made thanks to the power of metaphor.

[6] Ba-dum tish! While we’re here, parrots seem to be some sort of muse super-food. The ‘Parrot Secrets’ e-book guy was reportedly doing $100k+ per year and I know of another company who got their break with parrot products now raking in $1mm+ per year per employee (and they have well over 200 employees).

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2 Responses to When muses can work and why they will break you

  1. Rocio says:

    I recently came across an infographic that outlined the cost of going to grad school vs starting your own business. Although I think furthering ones education is important, starting your own business is clearly a wiser solution if you have all the right tools and ideas. Of course making sure your muse is the right one is also very important.

  2. Michael Simpson says:

    Rob,

    Thanks a lot for this, super interesting. What is your take on info product muses (as described in the 4HWW)?

    Here is an example of a great info product website that pulls in well over 6 figures / year in sales (I know this from discussions with the owners). Granted the owners have not chosen to automate the operations, and hence this is not a muse per se, but much of the revenue does arise from pdf sales:

    http://managementconsulted.com/consulting-products-and-services/

    Michael

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