5 ways to beat the popular misconceptions of business
In this exclusive extract from his new book, entrepreneur Mark Homer looks at five ways you can "go against the tide" to create a profitable business...
Mark Homer started his first business at the age of 15 and went on to find success in the property industry; buying and selling over 350 properties. Here, the property entrepreneur and author offers up his five-step ‘uncommon sense’ philosophy on how budding business owners can generate lasting revenue and sustained results by breaking with convention:
1. Have half an eye on mainstream views and news
Some successful people have a ‘no mass media’ diet. While I understand why they want to stay positive and be unaffected by hypothesis and hyperbole, I feel it is important to stay in touch with current affairs.
General news and politics affect stock and asset prices and also custom to your business. Therefore, they are an important part of business and investing. You just have to manage the correct dosage of each outlet, taking the credible ones seriously and taking the sensationalist ones with a pinch of salt.
2. Investigate and research for yourself
Look for information and strategies that are different, unexploited and unhyped and offer value that others haven’t yet discovered.
Many successful business people – like Walt Disney, Warren Buffett and James Caan – have followed the mantra of ‘observe the masses, do the opposite’. This has now become more mainstream than it used to be because it has been popularised by people whose success has been vast enough to reach the mainstream, and also because of the current popularisation of business and entrepreneurship with shows like Dragons’ Den and The Apprentice.
This will lead to point three below, but, for now, ensure that you take all mainstream media, commentary and advice with a pinch of salt. Do your own diligence and research, and educate yourself in niches that seem to be untapped and have inherent value.
3. Don’t be contrarian for the sake of it
In order to not be contrarian for the sake of being contrarian, we need to define contrarianism. A contrarian is someone who rejects popular opinion or current practice, regardless of how popular it might be.
I believe this to be a useful mindset and strategy for investing, business and finance, because the asset value is likely to be overpriced if everyone thinks it is good. Often when something is popular, many have already bought into the asset and there is a premium attached to the price. The greater the excitement in an asset class, the more ‘froth’ it has (airy matter with no substance). There is an excited expectation of the forward price, but without there being any real substance or value.
When the market turns, the froth evaporates fast and you find that the coffee you bought fills only half the cup, the froth taking with it a chunk of the value of your asset.
Because ‘contrarianism’ has become a concept in its own right, popularised by successful investors like Warren Buffett, or the perception of him, it has started to take on mainstream appeal. As soon as something can be ‘defined’, it can be copied and the masses inevitably flock in. The more exposure contrarianism gets, the less contrarian it becomes.
This is a paradox and a reason why I am avoiding giving you a one-line quote or one-word name for my investment strategies. They are not holistic and cannot be simplified. Once labelled, they may be blindly followed and thus become less effective.
By virtue of the fact that most business owners and investors are not successful for a sustained period of time, you will be doing the opposite of the masses, and that is as far as we should define it. So be contrarian because others don’t and can’t do what you can do – not just for the sake of it.
4. Don’t innovate too early
It is true to say that you can be ‘too early’ in a business model or investment. If you had the idea for the internet in 1695, you may have been burned at the stake. If your model or investment theory is too complicated, relies heavily on very advanced technology, or has great resistance from competitors, it may be best to put it on ice and wait.
There are some famous-but-didn’t-become-famous examples of those who were too early. Remember ‘Ask Jeeves’, the search engine? Or The Go Corporation which created the early palm pilots and tablets that Apple have leveraged so well? LetsBuyIt.com was Groupon before Groupon. LoudCloud was cloud computing before cloud computing.
Being the first, one of the first, or very early, of course, has the upside of there being less competition, more value and more room for growth, but it has the big risk downside of not being tested, proven, understood or scalable.
You often hear only the wild success stories of the innovations that changed the world, and not the hundreds or thousands of failed cases. And, in fact, if you look at those wild successes, Facebook was not the first social media platform, Apple didn’t produce the first phone, computer or music-sharing site, and eBay and Amazon were not the first online auction or retail sites.
You are often best observing the ‘version 2.0s’. Watch, sit on your hands for a while, learn and see how they develop and whether they can get through those hard early stages. Let them test and burn cash for you.
Learn vicariously through their mistakes, and then get in once the concept has been proven and when the major risks and errors have mostly been removed.
5. Look for hidden-from-the-masses value
Value is latent profit, and so has not been fully extracted. By definition, it is hidden from the masses.
- How can you find those hidden gems?
- Can you look at a class in a different way?
- Can you look at a new class completely?
- Can you iterate a strategy that was nearly there but missed an essential ingredient or improvement?
- Can you look at a different field and bring existing models into your new field as a way of innovating without the risk?
I like to go running as it clears my mind and sets me up for a day of productive business and investing. When I run, and often while I am driving, I will take strategic detours in search of hidden properties. Maybe they are properties that have just come on the market and didn’t have a ‘for sale’ board up yesterday. Maybe they are properties hidden behind trees that I didn’t notice before.
Maybe they are properties that have been defaced, that are in disrepair, have multiple ‘for sale’ boards outside, or are for lease. If I can spot these first, or more specifically, if I can spot the change of circumstances first, I may have found a hidden-from-the-masses asset with value to be extracted and cashed in on.
Follow these five guidelines that form the ‘uncommon sense’ philosophy and you will beat the popular misconceptions of business, investing and finance, and you will profit handsomely by going against the tide.
Learn more about Homer’s strategy to “going against the tide” in his new book Uncommon Sense, available to buy here.