Ramit Sethi has been a guest on Pat Flynn’s Smart Passive Income podcast three times. Sethi had many good things to say to Altucher when they talked in episode #36, and his time with Flynn is no different. In those conversation Sethi laid out, how to build your product, how to market it, and how to make decisions.
I’m a fan of Sethi and writing this post was quite fun. It was like picking up breadcrumbs that someone had dropped along a path, leading me to a big idea. That said, there’s probably something I missed. If you notice a big ideas missing, please let me know.
How do you build a product?
If the key in real-estate is; location, location, location. Then the key to internet products according to Sethi is; research, research, research.
Sethi’s first blog, I Will Teach You To Be Rich, was built on answers to questions his friends asked. A book came from the blog. While on tour to promote the book, people started asking him questions that weren’t in the book. One of those questions was about how to make a side income. Which led to the next project.
This sequence isn’t uncommon. Austin Kleon (episode #19), Wayne Dyer (episode #6), Steven Kotler (episode #118), Stephen Dubner (episode #110) and others have all said that they got ideas for their next project from questions raised by their current one.
You want to spend time on research, not just creating, Sethi says.
Justin Jackson (@mijustin) – another product person – tells this story. He was walking to his barber one day, turning over ideas in his head. One was about how to improve his barber’s scheduling system. Jackson could create an online tool that let people schedule appointments, see openings, and make changes. The barber could collect email addresses, track key metrics, and sell products. Then, if he can build a system for one barber, he can sell a license to other barbers. This appeared to be a win for everyone.
When Jackson arrives at the barber shop, he hops into the chair and starts to share his ideas.
The barber listens patiently for a few minutes, but interrupts Jackson to tell him that he hears this idea all the time. “All the time?” Jackson asks, “but then why don’t you do it?”
“It won’t work for me,” the barber tells him. The barber explains that he wants something that’s quick and easy. He needs to efficiently answer the phone while cutting someone’s hair, check and note the caller’s appointment time, and get back to the job at hand.
Jackson thought he had a golden idea until he talked to his potential audience.
Sethi puts hard numbers down, spend 50% of your time on research. That doesn’t mean tweeting, “Hey guys, I need your help, what do you think I should build/write/code/draw/design.” Instead, look for a problem to solve, then:
1. Create a surveymonkey survey. These don’t have to be perfect questions, but put your best guesses out there.
As the results come in, talk to people in your industry and ask key metric standards. If you emailed everyone on your email list and 10% responded, figure out if that’s an average number. Ask how big someone’s list size is, ask them about how often they email people. Ask lots of questions.
2. Create a Google Doc. While the survey responses pile up, create a document with your predictions. If the question is, “What do you like most about vacation” put headings like, Relax, Family Time, Sand, Etc.
At this point these are your best guesses, and they are merely a place to start. Do not become attached to them because:
3. Disprove your Doc assumptions. Did you know the term Devil’s Advocate originated the Roman Catholic Church? It was a position assigned to someone who would make the case against someone’s canonization. That’s what you – or your team – needs to do.
If you’ve got more than one person, your most convincing advocate will be someone who actually believes in their stance. In Yes!: 50 Scientifically Proven Ways to Be Persuasive, the authors write that someone who’s merely playing the role will be viewed as less persuasive by their co-workers.
Sethi saw his assumptions dwindle like a stack of chips at the craps table when he launched his Earn1K course. He thought people wanted to create extra income to be “ballers” who flew to Las Vegas for the weekend. In reality people wanted optionality in their lives. The wanted the ability to do this or that or not do something.
Look at the survey results and start to see how things fit with your original assumptions. The goal here is to figure out the shape and picture of the puzzle that’s forming. While you do this, be open to the idea that your original pieces may not be part of the final puzzle.
4. Create a picture with real people. In your document you want to include headings that are the big ideas that have emerged, and direct quotes from people. If the reason they go on vacation is to “get away from the office” then those exact words need to end up on your document.
At this point you don’t need to worry about statistical significance. If only 16.87% of people say they like to “get away” that’s fine at this point. You’re like someone who’s chosen to begin a healthy diet. You don’t need to know the difference between quinoa and couscous, you do need to know the difference between couscous and candy bars
5. Interview people. Much like the survey and document, this doesn’t need to be complicated. Sethi notes that you need to check your biases at the door and don’t ask leading questions. This stage is still research and to dive deeper into the problem that people are having.
Soon you will start to get an idea about what people want. Sethi says:
“At a certain point I start to see a lot of patterns in people. They’re going to always be using the same words. They’re going to be saying the same things, and at a certain point instead of just listening I can say, “You know, it sounds like what you’re saying is blah blah blah” and I kind of read back what I’ve learned. Sometimes they’ll say, “Well, kind of, but not really.””
Only then can you start to probe and say things like, “if there was a vacation autoresponder that cut down on your mobile emails would you use that?” or “if there was a way to get back into work-mode when you returned, would you pay for something like that?”
Once you start to poke around and get traction you need to find hard yeses to these questions. If someone hasn’t said, “shut up and take my money,” you need to keep looking.
6. Create small groups. Once you think you have something, you can build it. This too can be quite small. Sethi says that his team will use Google Docs to create a slide deck for people to go through. That works because this is still not a polished project.
Ask 10-20 people to be part of your small group. Have them go through the entire course/book/system that your research suggested.
Product people sometimes miss this – I know I have – but it’s everywhere once you realize it. Authors have beta readers they seek feedback from. Comedians go to clubs on Tuesday nights to test material.
7. Maintain an internal locus of control. Do not worry about what other people are doing. Do not worry that So-and-so released such-and-such and it’s their 4th one this year. You do not care. Bigger numbers don’t necessarily mean more or better.
For example, Peter Thiel (episode #43) writes that bigger corporate boards aren’t necessarily better boards. You might think that more minds might mean more solutions, but this isn’t Thiel’s experience. More minds mean more debate and fewer decisions.
You can only control the things you do, you may as well focus on those. Michael Singer (episode #119) suggests you mentally lean back and imagine things passing you. T. Harv Eker (episode #100) says that he mentally says, “thank you for sharing,” when distracting thoughts arise.
Ramit Sethi’s Guide to Marketing
Marketing – like development – comes from the research. Marketing and Development are not a chicken and egg problem. Marketing and Development are a egg and scrambled egg breakfast platter problem. One must come before the other.
If you do good research for development, your marketing should flow right out of that. That said, here are some macro ideas anyone can use.
1. Let your language flow from your research. Sethi says that his “Earn 1K” program was called something different in the development stages. After some tests, his team realized they needed to tone down the language because people didn’t believe it.
For example, Sethi says. If you were to create a dating product, think about how your language may differ for different sexes. For men it may be; “double your dating.” For women; “catch him and keep him.”
With any of these ideas, let the copy come from the customer’s cries.
2. Answer objections. Sethi calls this the Theory of Preeminence and he outlined it in his first talk with James Altucher. “When we created a product called Earn1K, this was the headline…finally a proven legitimate program to identify a profitable idea and turn it into a reliable side income of a $1,000 a month with just five hours a week.” Then Sethi explains why this works:
- Some people earn 10K but many don’t believe it, 1K is reachable.
- Don’t I need to quit my job? Nope, it’s a side income.
- This sounds like a scam, has it been tested? Yes, it’s proven and reliable.
- But what if I don’t have an idea? The course helps you identify one.
3. Give social proof. People want to see that people like them – and the more similar the better – have used the product. This is where you can go back to your small group. Sethi says that some of his small groups have been free, on the condition of those people letting IWT to interview them later on. This is social proof, and the better you implement it, the better your results will be.
Researchers have found that good social proof can improve conversations from 0-25% and great social proof from 25-32%. The more niched your product, the more focused you can be with your social proof. In the vacation example you can focus on men who travel for business. In the dating example you can focus on young people who live in large metropolitans.
4. Know what your market will pay. Sethi says that one of his first products was about how to save money. “Guess what,” he says, “people who want to save money don’t want to pay to to see how.” That was poor alignment on his part Sethi says.
5. And don’t sacrifice your price. Unless you’re selling t-shirts at Target, don’t discount your product. If you worked hard on something and it’s worth $50, then sell it for $50.
You need to be confident in what you’ve created, Sethi says, and this comes from all the testing and research you’ve done.
Instead of thinking in terms of cost, think in terms of value. How helpful is the thing that you’ve created? Books are classic examples of great values but they are priced at <$20 (an example of #4 above). No matter how great your book is, you’ll be hard pressed to sell it for a lot more than that.
But many books have great value. I’ve read some books where I would have liked further discussion on a topic or someone to follow up with how I was putting the principles into practice or video examples. If you can create more ways to interact, apply, or understand the material then that’s added value.
6. Sell in long emails. “One thing I’ve learned,” Sethi says, “is if people have a pain point or if they are interested in what you have to say, there’s no limit to what they’ll read.”
Each email that you send should contain something of value, Sethi says. People should be excited to open your email and see what’s inside.
This also filters in the right people. If your writing is a reflection of who you are and what you are selling, then it’s step one of customer acquisition.
Ramit Sethi’s Guide to Running a Business
Sethi has been doing the internet business hustle long enough now that it’s his business, not a side project and he thinks of it like one. There are a few lessons he’s learned along the way that can help anyone with their business.
1. Understand psychology. There are a lot of psychological tools that Sethi uses in his sales pages, and for good reason, they work. Ideas like scarcity, abundance, social proof, and more are all little levers we can pull that will nudge people along. In an interview with Tim Ferriss he recommended people read, Mindless Eating, The Age of Propaganda, and The Social Animal.
There’s a reason people don’t change, Sethi says, and it’s not for a lack of information.
“Hey, everyone knows what those compound interest charts are, they don’t change behavior at all. Or when it comes to dieting, or weight loss–“If people really understood how bad carbs are, if we just wrote another paper on it, then they would change.” WRONG! If they change their behavior first, then their attitude will follow.”
Howard Marks noted that the biggest #fail in investing is psychological misunderstandings, not financial ones. To fix our thinking, we need to flip the sequence we often try. Both A.J. Jacobs (episode #94) and Gretchen Rubin (episode #97) use the idea that behavior -> thinking pattern and Sethi does too.
2. Does 5X move the needle? Did you know there’s an IWT app? Yep, really. For all the things Sethi is, he’s not one to shy away from talking about his products. Yet I had never heard of the app before. It’s because they’ve cut bait on it.
Sethi says that they had a meeting about it and a team member suggested they spend some time optimizing the app and making changes. They could do that, Ramit says, but it wouldn’t really change anything.
“I called it the 5x Principle, because even if we 5x sales, it would make no material impact. It wouldn’t even move the needle!”
They could have changed the app and increased sales fivefold, but it wouldn’t have had a significant impact.
3. Haters gonna hate. There will be people who call you names, it did not end in middle school. The key is to not take it personally, because it will eat you away if you let it. Pat Flynn says, “when I would get negative criticisms for something I would think about it for DAYS. It would just kill me.”
Amanda Palmer (episode #82) and James Altucher both said the same thing – it hurts.
4. You are a CEO – act like one. “I want everyone listening to start thinking of themselves as a CEO,” says Sethi, “not some scrappy internet nutcase but a CEO. A CEO walks into the room and they think very methodically and deliberately.”
One way to improve your thinking is to develop decision making models like Michael Mauboussin (episode #TKP1). Peter Thiel also has some good mental models. Shane Parrish at Farnam Street has the best collection of them.
If there’s a conclusion to Sethi’s system it’s; just do it. Do one small thing that moves your business or book or course forward. While writing this I thought how similar it was to walking through a dark room. You can’t see anything and sort of move slowly about. You’ll run into the chair and maybe knock over a lamp. But if you remember where the chair and lamp are, you won’t make that same mistake twice. That’s Sethi’s secret – don’t make the same mistake twice. Learn lessons along the way. Do research that gives you a leg up on your guesses and be critical of them.
But how do you do it? Where do you start? Begin by finding smart people to get ideas from. I started this site because James Altucher consistently has podcast guests sharing great ideas.