Daymond John (@TheSharkDaymond) joined James Altucher (@JAltucher) to talk about why it helps to be broke. We’ve seen the value of constraints before:
– Kevin Kelly said that a lack of money can be a valuable constraint because it forces you to invent solutions.
– Amanda Palmer said, “limitations can expand rather than shrink the creative flow.”
– Austin Kleon said that that people overestimate what they can get done in large amounts of time. This is the corollary to the axiom, if you want something done, give it to the busiest person you know.
– Maria Popova only got started reading the classics because it was all she had access to. Now it’s a central part of Brain Pickings.
– David Levien wrote short, active chapters because he had a short train commute.
– Seth Godin made a video game shorter and simplier because he had limited bandwidth, and it was better because of it.
– Scott Galloway created his company L2 because there are constraints on what companies can do.
We’ll add Daymond John to the list, as his entire conversation with Altucher circles around his new book The Power of Broke: How Empty Pocket, A Tight Budget, and A Hunger for Success Can Become Your Greatest Competitive Advantage, a book of stories about the value of constraints.
It’s easy to say that having less of something is good for you, but how? John explains how this can help your business.
1- Don’t start a company when you have a lot money. John tells Altucher that he noticed his company FUBU was dressing everyone in their music videos. Why don’t we create music, John asked. He set up a label, recorded an album, and was ready to make it big.
“We thought money was going to shorten our learning curve,” John says, “we decided to spent money on more advertising, glossier videos, and a big shiny office people would come up and see.”
It didn’t work because, John says, “we never went through the maze.”
They failed to create trust, a brand, and learn what made music popular from the producer’s point of view. Those answers are only in the minutiae of the day-to-day work when you build something.
2- Think broadly in terms of assets, not narrowly about only money. This interview is a good example of thinking of assets rather than money. “Assets are what feeds you, liabilities are what eats you,” John explains. If a lack of money (as a constraint) is valuable, it’s because it forces people to rely on their other assets.
Who do you know that can help, John asks. Nicholas Megalis said this same thing about making online videos. There are people out there who have assets that you can use, said Megalis, use the internet to connect with them.
For John that meant teaming up with L.L. Cool J and getting him to wear FUBU clothing. These other assets are often priceless. John couldn’t have paid L.L. Cool J to wear his clothes and promote them in the same way as when he asked him to wear them. It created a different type of relationship, the only kind that would work.
Tim Ferriss mentioned this vis a vis his podcast. He couldn’t buy the time of his podcast guests, but he could provide them exposure on his platform and people might be willing to come on for that.
3- You need to run the maze and do the initial work. John says that his first glimpse that this might work was Good Friday, 1989. His mom had just showed him how he could make the kind of hat he wanted and he took a garbage bag full of them to the mall. He sold $800 in an hour. “There’s nobody in my way…it just opened my eyes,” said John.
But, it had to be him. Later in the interview he tells Altucher that a sales team wouldn’t have worked. They wouldn’t have hustled like him. They wouldn’t have talked to customers like him. They didn’t have the same passion as John, and wouldn’t have gotten the same results.
Fellow fashion entrepreneur Sophia Amoruso told this same story. If something didn’t sell she wouldn’t touch anything like it “with a ten foot poll.” She had to be the one to see that.
Systems talk to us but we need to listen. John was there and he listened. Amoruso was there and she listened. When you are the only one there, you are the only one to listen.
4- A rising tide lifts all boats. FUBU was one of the boats and on the tide that was hip-hop. “You don’t have to be a big start,” John says, “just someone that people respect in the market.” If you get the timing right, you just need to be there and be early.
Howard Marks saw this shift as well. He says that he “was lucky to get in early” during the birth of the high yield bond fund.
Chris Dixon said that he looks for a company founder to have one of three attributes, technical skill, domain expertise, or understanding of a culuraul movement. John knew the cultural movement we call hip-hop inside and out.
Dixon mentions the sharing economy (AirBnB and Uber) as another example of the rising tide effect. Matt Barrie was a personal example for the freelancing trend. Sophia Amoruso an example of the clicks not bricks trend.
5- Don’t blow up. John says “all entrepreneurs that are successful take affordable next steps, they don’t mortgage the entire farm on the first bet they have.” (tweet this) The key is to survive until tomorrow. If you can do that each day you’ll succeed.
Josh Kopelman and Sarah Tavel both said that if someone were starting out in venture capital they should make little bets.
“Success boils down to serially avoiding catastrophic failure while routinely absorbing manageable damage.” – David McRaney
Besides not making any bets that are too big, how else can you avoid blowing up?
– Brett Steenbarger suggested to not have your emotions and personal life wrapped up in your work.
– Chris Sacca said to look at the downside, if I could instantly go to zero then it’s not worth doing.
– Nick Murray warned that the easiest way to blow up was to chase big gains.
Thanks for reading, I’m @mikedariano on Twitter. If you like this post, you may also like my series about Survivorship Bias on Medium. It’s the antithesis of this site. Here I write about people who succeeded, there I write about people who didn’t.
If you liked this post you can also check out Ramit Sethi’s business advice or how to create an X-MBA.
9 thoughts on “Business Lessons from Daymond John”
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