In too many situations we automatically experience people as “them”—not “us.” These jungle-type habits of mind are dangerous to our species.
—Ken Keyes Jr.
This book is meant to be a prescription for building a successful business in a free market system. As you will find out, it probably serves as well—if not better—as a polemic against such prescriptions.
Please excuse the apparent contradiction. I know that if you’re patient, somewhere in the middle resides a truth worth digging for. But to get there, you’re going to have to do some of the work. You’re going to have to stretch where I stretch and let go where I let go.
In other words, you’re going to have to be willing to play an always frustrating, but sometimes enlightening, game, a game I call how do you provide an answer to a question that you know has no answer?
In a free market system, that’s the game called business.
To anyone with even a passing interest in the comings and goings of the free market system in the United States, it should be apparent that the life of a business here is a precarious thing. If the business is a good idea—that is, if it does all the right things in the right way and at the right time, and is lucky—it succeeds.
If it’s a bad idea, it doesn’t.
Even worse, it could appear to be a good idea, but shifts—more like earthquakes—in the economy can sink it. Wasn’t Washington Mutual a good idea? Wasn’t Fannie Mae? Wasn’t Lehman Brothers? Wasn’t AIG?
Unfortunately, the truth is that for the people who invest in other people’s businesses, for those who start a business of their own, or for those who work for either of the other two, most businesses turn out to be bad ideas; most businesses fail. Even the so-called giants.
More frustrating is that, in a free market system, even the good ideas—the businesses that succeed—turn into the bad ideas in time.
The weather changes. A new company moves in across the street. People stop having babies. Somebody comes up with a better idea. The economy experiences a so-called correction. Or—and this happens—someone comes up with a worse idea but implements it better.
In short, a free market system provides all of us with significantly more opportunity to fail than to succeed.
What worked yesterday will most likely not work today, and the fact that something works today is insufficient justification for planning to do it the same way tomorrow.
How can we minimize the risk?
If an estimated six out of ten companies funded by professional venture capitalists go under (some estimates run as high as 90 percent*), how can anyone else expect to do better? Shouldn’t we be able to expect better in a world with so much information at hand, with so much technical and technological know-how at our disposal, and with so many well-trained managers available? *
For years, clients have been asking me those very questions.
Is there a common denominator we can use to take a more accurate measure of a business idea?
Is there a pattern—a template—we can use to evaluate a business and its likelihood of achieving significant success?
Is there something all great businesses do that can be replicated by other businesses wishing to become great?
Is there a way to clone greatness?
I believe the answer to each of these questions is yes.
This book is my answer to those thousands of clients and businesspeople who have asked me these questions over the years, as well as to the millions of entrepreneurs, would-be entrepreneurs, and managers I have never met to whom these questions are just as important.
In a deceptively thin book, I have organized the fundamental principles that I believe form the foundation of every lasting great business into a template or model of greatness, the presence of which in any business would indicate with a great degree of certainty what I call the success-proneness of that business, and the absence of which would indicate that a business is not likely to pass the test of time.
The value of this template is that it is timeless. It will work for any enterprise, any time, at any place in the world.
It transcends epochs, technology, industry, markets, economies, and geography.
It could have been implemented as effectively in the nineteenth century as it is now.
It could be put to good work just as effectively in the emerging Eastern European free market experiment, as it could in the United States free market’s attempt to recapture its own lost glory.
It could just as well be applied to a corner grocery store as to a semiconductor plant in Chandler, Arizona, or an iPod factory in China.
The reason it is so timeless and so transferable is because it is founded upon the one sacrosanct requirement upon which the existence of every business in a free market system always has depended, and always will depend.
That is, to succeed, every business in a free market system must learn how to satisfy, better than its competitors, the essential needs, unconscious expectations, and perceived preferences of the four most important groups of people in its universe: (1) the people who work for it; (2) the people who buy from it; (3) the people who sell to it; and (4) the people who lend to it: its employees, customers, suppliers, and financial institutions.
It is the combined judgment of all these people, these four primary influencers, upon which the ultimate success or failure—yes, the life or death—of every business enterprise ultimately depends.
Which brings us to our first rule of thumb.
And that is, in a free market system…
Businesses Exist Only Because People Want Them To.
I hope that statement doesn’t come as a big surprise to you.
It surprises me that most businesses seem to operate as though exactly the opposite were true.
As though people exist because of businesses.
As though God created businesses first, and only when the businesses were seen not to work did He create people to go to work in them, to buy from them, to sell to them, and to lend to them.
I know that’s a dumb thing to say—I know it.
But it’s an even dumber thing to do. Yet for many businesses it’s standard operating procedure.
Which brings us to our second rule of thumb. And that is, in a free market system…
People Are Regarded as a Problem to Most Businesses.
Yes, to most businesses in a free market system, people are regarded as a problem—not only the people who work in the business, but the people who sell to the business, the people who buy from the business, and the people who lend to the business. All people are regarded as a problem. And they’re a problem because they’re so unmanageable. When people are manageable, they’re not a problem anymore. They’re invisible.
That’s what most businesses I have seen would like people to be. Invisible. Not a problem. Not needing attention. Pliable. Easy.
That’s why there are systems in the world other than the free market system.
Other systems were created to eliminate the problem of people. In other systems, people aren’t a problem because it doesn’t matter what they want.
In a free market system, you can’t get away with that mind-set for very long, and that’s what drives everybody nuts trying to run a business in this system.
In a free market system, we have to come to grips with the fact that there are all these people—needing, needing, needing.
Unfortunately, in a free market system, all of them are needing the same damn thing—MORE!
More of what?
More of everything!
But don’t people know that there’s only so much a business can give?
Why aren’t they understanding, like us?
Like who?
Like businesspeople.
Like the people who run the business.
Like the people here in the business at the top.
Like the people who own the business.
Like the people who manage the business.
Like the people who would like other people to be more reasonable.
Like the people very much like us, who want…what?
Who want MORE.
Who want more of what?
Of everything!
But a business can only give so much!
Who said?
In a free market system, businesses are invented by people for a very special reason.
But despite what most of us believe, businesses are not invented only by those people who go into business—the so-called entrepreneurs among us.
In a free market system, businesses are invented by all of us—by each and every one of us. The reason we invent businesses in a free market system, like ours in the United States, is to do one thing—and only one thing: to create MORE. Businesses in a free market system are the instruments through which people get MORE.
In all other systems, businesses are the instrument through which most people hopefully get enough (but rarely do), while some people—some very few people—get the MORE that everyone else isn’t getting.
But in the free market system, everyone is supposed to get MORE.
The problem with the free market system is that when everyone doesn’t get the MORE that they want, then “shit happens” (as the crude bumper sticker states).
And that’s the part of the free market system called business, which very few people in business seem to fully understand.
A business in the free market system is only justifiable in the minds of people—is only tolerated in the minds of people, is only permitted to exist in the minds of people—if the business learns how to give them MORE.
A business is intended to be a perpetual motion machine, the only purpose of which is to find ways to give people MORE.
A business is a mechanism designed to produce MORE for the continually rising expectations of people in a free market system.
And in a free market system, the minute a business forgets these things, the minute a business stops providing MORE, the minute a business begins to ignore its sole purpose for being in a free market system—its raison d’être—it ceases playing the game called business.
It begins to play the game called good-bye.
Which brings us to our third rule of thumb.
And that is, in a free market system…
Service Is an Incomplete Word.
If everyone understood that, in a free market system such as we have in the United States, the game called business is all about creating MORE for everyone, we would immediately understand why service is an incomplete word: it doesn’t include enough.
It doesn’t include the employees. It doesn’t include the suppliers. It doesn’t include the lenders. It only includes the customers.
Service is an incomplete word because it says, “The customer is king!”
But as it works out in real life, the customer isn’t king except in the mind of the customer.
To the employees, the customer isn’t king; he’s often a pain in the ass.
To the suppliers, the customer isn’t queen; she’s often a problem waiting to happen.
To the lenders, the customer isn’t king; he’s often a drunk hanging on to a wagon careening into a wall.
No, the customer isn’t king to them—they are!
“If the customer is king,” they all ask privately, deep in the hidden recesses of their longing hearts, “what about me?”
That’s what everybody else is asking too: “What about me?”
That’s what happens when we don’t understand the game of business as it’s meant to be played in a free market system. People start asking the most obvious questions.
It should be obvious that, by itself, a strong focus on the customer is insufficient to create a successful business. There can be no such thing as effective customer service in a company where the employees are disenchanted, where the owners aren’t making a decent profit, where the suppliers aren’t getting paid on time.
In short, a strong focus on customer service not only is insufficient to produce lasting results in a company, but, in itself, makes lasting results impossible to achieve.
Which brings us to our fourth rule of thumb.
And that is, in a free market system…
There Aren’t Any Good Answers for Long.
If, as we’ve already agreed, the purpose of a business is to serve as an instrument through which people in a free market system get what they want—and what they always want is MORE—then it is safe to assume that any business that comes up with MORE is serving its purpose well, and therefore survives. Any business that fails to come up with MORE is not serving its purpose at all, and therefore dies.
This leads us to the unavoidable conclusion that every time a business comes up with an answer, that answer bears within it the seeds of its own demise.
Every answer in a successful business is only a temporary solution reached on the never-ending path toward the search for MORE.
Which means that for businesses operating in the Land of MORE, there aren’t any answers, only questions. And the questions all lead in the same direction—the direction that every sensible, aware, responsive, dynamic chief executive officer knows as the only way to MORE.
This is the way every successful business operating in a free market system from time immemorial has followed: the search for the ineffable, the indefinable, the unknowable, the indisputably, irrefutably, pragmatically, unavoidably aggravating Holy Grail of MORE.
The only justification necessary is “If we don’t, they will. And if they find it first, our ass is grass.”
Which leads us to our fifth rule of thumb.
And that is, in a free market system…
You Are Either the Lawn Mower or the Lawn.
Which is where we began this little moralistic tale—that in a free market system, business is a precarious thing; your very survival is at stake.
And in the Land of MORE, as we’ve already learned, if you don’t survive, it’s because you didn’t deserve to.
You weren’t paying attention.
Somebody opened the gate and rolled in the John Deere while you weren’t looking.
Suddenly, your role was defined for you: your ass was grass.
This is the same way the role is defined for most businesses, every single day of the year: because they aren’t playing the game called business; they’re playing the game called good-bye.
What’s sad is that they refuse to accept that there’s a difference between the two games.
Yes, it’s sad and it’s true that most businesses, large and small, are living by rules of thumb that aren’t rules at all, but the cover of the box they’ve laid down in.
They have stopped asking questions and have come up with an unsuitable (that is, self-serving) answer.
A close friend of mine wrote a book about the meaning of money. He observed that few of us really understand what money is; we simply use it. He feels strongly that we’re paying a big price for our ignorance.
I feel the same way about business.
Like money, business touches each and every one of us at every turn—our food, our clothes, our entertainment, our recreation, our health—our very life. Every choice we make is impacted by business in some form, creating some service or product upon which we depend, or have grown to depend, if not for our very survival, at least for the survival of the lifestyle we have grown to enjoy.
Every day, all around us, businesses are being born, living, struggling, and dying. Each of them, like each of us, is a unique being with a unique identity and a unique place in the world. All of the characteristics found in each of us—active or passive, creative or dull, passionate or stingy, growing or withdrawn—can be found in a business.
Yet, just as with money, few of us understand what this thing called business really is. We go to work in them, buy from them, and have opinions about them. But we don’t understand them.
To most people, business is what goes on around us while we get on with our lives, something being done “out there”—at most a commercial enterprise, a place to make money, a place to go to work, a place to buy things, or a place that makes things we buy.
Few people seem to understand that business is much more than these individual factors.
In a free market system, business isn’t what goes on around us while we get on with our lives. Business is our lives.
Business is what we do, all we do, who we are.
In a free market system, business is the organized expression of our growing self-interest manifesting itself the best way it knows how.
Business is a living thing.
Look at our businesses, and you’ll know who we are.
In a free market system, everyone is touched by the allure of business. You can’t get away from it.
Writers talk about the business of writing books.
Artists talk about the business of creating art.
Intellectuals talk about the business of communicating ideas.
Spiritualists talk about the business of raising our spiritual awareness.
Meditators talk about the business of teaching us how to sit.
Chiropractors talk about the business of teaching us how to stand.
Preachers are in the religion business.
Musicians are in the music business.
Pediatricians are in the baby business.
Cardiologists are in the heart business.
We have taken the world apart and put it back together again as a business.
The business of government.
The business of education.
The business of health.
The business of art.
We live the illusion that we understand what business is, when in fact we don’t.
Despite what most people think, business isn’t doing or creating something to be sold.
Business is a living thing that feeds and grows on the expectations, perceptions, needs, fears, and greed of the people with whom it comes into contact.
Business is a product of everything we believe to be true, need to be true, want to be true.
Our businesses are us, and we are our businesses.
Which brings us to the point at hand: the E-Myth Enterprise and the Position of One.
That is, a business, any business, can succeed only to the degree that it gives each and every one of its four primary influencers MORE than they can expect from any one of its competitors.
The way in which a business accomplishes this objective is what we would call a good idea.
An idea that will attract customers to it.
An idea that will attract employees to it.
An idea that will attract suppliers to it.
An idea that will attract lenders to it.
It is an idea that attracts, with the greatest of force, the interest and attention of the four primary influencers, and acts with the same force with which it attracts.
The force of any idea originates in the essential needs, perceived preferences, and unconscious expectations of the people it is intended to serve; an idea has no force of its own.
Thought of in that way, a good idea for a business is one that serves the most people best. A bad idea for a business is one that serves the most people least.
The Position of One is that locus of energy—that fusion of attention—created when a good idea attracts to itself the self-interests of customers, employees, suppliers, and lenders alike with an equal, active, intensely interested force, which then moves out into the world to attract more force, which, in turn, moves out into the world to attract even more force, thus growing and expanding and exploding with a power unrivaled by its competitors.
Like a star. Like the sun. Like the eye of a storm.
That’s the power of the Position of One.