Note: The following essay is an excerpt from the upcoming new and revised edition of Ready, Fire, Aim. 

Survival of the Fastest 

The first challenge an entrepreneur faces in launching a new business is to figure out the optimal selling strategy (OSS) – how to acquire a steady flow of new customers by selling them a “front-end” product at an allowable acquisition cost. This is mostly about exploring a variety of media, testing a range of offers, and discovering the product features and benefits that are most attractive to the target audience.

It usually takes a few years to accomplish this goal. So it’s understandable that when you get your Stage One business to the point where you’re ready to break into Stage Two (with approximately $1 million in revenue), you and your team will be exhausted from all the testing, from the many disappointments and occasional advances, and you’ll want to relax a bit and let the successful selling strategy you developed roll out on its own.

Many entrepreneurs do this. And some are content to let the business settle in at that level and grow gently from there.

I have never been able to do this. The moment a business achieves its primary Stage One goal – discovering the OSS – I want to double down on the time, energy, and resources we’ve been giving to the project and grow through Stage Two (from $1 million to $10 million in revenue) as quickly as possible.

I feel that way for two reasons. First, I have seen too many start-ups begin to founder after a year or two of breaking into Stage Two and eventually fail. Second, I’m just not interested in maintaining status quo. For me, the fun of being in business is the challenge of growing it.

I don’t think there’s anything wrong with putting a business on cruise control. In fact, I secretly admire people that can do it. They are wise enough to be happy with what is.

But not me. And especially not at this stage of growth. Getting through Stage One is hard. It’s like slogging up a high hill with a heavy pack on your back. But Stage Two is a different experience. If you can make the needed adjustments, it can be like jetting up to the peak of a snow-covered mountain on a motor bike.

Stage Two is where you can experience the greatest changes and the fastest growth. But you can’t do it with the same ideas, habits, and protocols that got you through Stage One.

In my last essay on this subject, we talked about innovation – how to create a culture that is open to and proficient at developing new and improved products. Today, we are going to talk about innovation’s counterpart: how to create a culture of speed.

I’ve always been impatient. When I decide to do something or accomplish something or acquire something, I want it right away. Although I know it’s sometimes very true, I cannot accept that slow and steady will ever win the race.

Most people are not like me. My guess is that being asked to move quickly makes four out of five people very uncomfortable. They don’t like the pressure. And they worry about accidents and mistakes.

If your start-up product is an airplane or a treatment for cancer, it makes sense to populate your business with slow-twitch workers and to implement procedures and protocols that favor accuracy. But for the vast majority of businesses, getting from Stage One through Stage Two is largely about speed.

A Simple Formula for Second-Stage Growth 

It may have taken several years to produce and market your first product successfully. But to take your company to the next level, you will have to develop and test multiple products in a much shorter period of time. You are already up and running. You have bills to pay. The competition is increasing. The only way to keep ahead is to transform your business into a super-speedy innovation and testing machine.

The thesis, very simply, is this:

The amount of growth a company can expect at its second stage of development is directly related to its ability to generate and test new-product ideas quickly. 

If you prefer math, here’s the equation: 80% of G = IV² (where G equals second-stage growth, I equals innovation, and Vequals velocity).

By surrounding yourself with smart people and following the suggestions in my August 5 essay, [LINK] you should be able to come up with more worthy ideas than you can possibly test by having a brainstorming meeting every three or four months.

The real challenge is the implementation. Unless you can get these new ideas into motion almost immediately and keep them in motion through the testing process, you will almost certainly find that they never amount to anything. However good they were when you first brainstormed them, the months or years that have passed since then will have rendered them yesterday’s news.

In terms of “Ready, Fire, Aim,” the number one problem of a Stage Two business is that the ideas, habits, and practices that got you this far are insufficient to get you to the next level. Frugality, flexibility, and tenacity were the virtues you and your team needed to get that first product out and running. But in Stage Two, you have to get dozens of products out and running – many at the same time.

As your company’s leader, you have to rally the troops with a speech that goes something like this:

Congratulations and thank you! We have accomplished the biggest challenge all new companies must face. We’ve figured out how to successfully sell our first front-end product and our first backends. I know you’ve all been working tirelessly to help make this happen. Now we have another challenge. We have to double, triple, or quadruple our production. And to do that, we’ve got to figure out how to double, triple, or quadruple the speed at which we do just about everything.

You are going to be making that speech to people that are still very busy with the work they’ve been doing. Few will be eager to take on this new challenge. And yet, unless you can get them on board your new high-speed train, the future of your business will be bland or even bleak.

Speed Up… or Give Up 

As I said, most people don’t like speed. And for good reasons. But as the CEO of your

Stage Two business, you have to not just embrace speed yourself but get your key people to embrace it, too.

To do that, you are going to have to convey to them the reality of the arena you have entered – where the size of the market, the competition you face, the demands of your customers, and the costs of running your business are so much higher.

You are going to have to convince them that there is no other option. That unless everyone gets behind this new paradigm, the company will die.

At the same time, point out that there’s a lot to like about working in this kind of high-pressure environment. Remind your key people that growth means less routine, less boredom, more fun, and much greater opportunities for personal advancement. Make them feel that in speeding up the business, they are speeding up their own careers.

Taking a new idea from concept to completion is exciting, but the process itself is often long and laborious. During tedious patches, there’s always the danger that your key people (and even you) will be tempted to pull away from the action and leave too much to chance.

Teach your key people that when ideas are left in limbo, details are forgotten. Obstacles arise. Enthusiasm wanes. And, finally, the idea is forgotten or – worse – implemented so weakly that it fails.

The space of time that stands between the birth of an idea and its execution is filled with the potential for failure. It’s your job to make sure that doesn’t happen.

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The Foundations of Economics, Part I: Hesiod’s Formula for Growing Wealth 

Work hard. Spend wisely. Save assiduously. Respect the law. If I were to write the Ten Commandments of Wealth Building, those might be the first four. Cultures that embrace these values grow rich and prosper. Cultures that ignore them languish at the bottom of the economies they inhabit.

As Murray Rothbard says in chapter one of History of Economic Thought, “It all began, as usual, with the Greeks. The ancient Greeks were the first civilized people to use their reason to think systematically about the world around them.”

In my August 31 essay, I listed some of their scientific, political, and cultural achievements. But I failed to mention the very good thinking they did on economics. The word itself stems from the Greek oikonomia, which refers to matters of saving, budgeting, and household management.

Aristotle (384 BC to 322 BC) contributed enormously to early economic thinking. (And I’ll be talking about his contributions in a future essay.) But Hesiod, a shepherd and poet that lived 400 years earlier, laid the foundation upon which Aristotle and those that followed him built their theories.

Hesiod identified the essential problem that all economists struggle with: the conflict between the ideal of unlimited abundance and the reality of limitations and scarcity.

From Rothbard: “Hesiod lived in the small, self-sufficient agricultural community of Ascra [and] was therefore naturally attuned to the eternal problem of scarcity, of the niggardliness of resources as contrasted to the sweep of man’s goals and desires.”

In his epic poem, Works and Days, Hesiod employs a mythology of human cultural evolution in five stages: the Golden Age, ruled by Cronos; the Silver Age, ruled by Zeus; the Bronze Age; the Heroic Age, the time of the Trojan war; and the Iron Age, Hesiod’s time, which he characterizes as corrupt.

He talks about the Golden Age, when people lived long and happy lives, free from sorrow because they had everything they could possibly want. But, he says, those days are over. Three things that were once infinitely abundant – labor, materials, and time – have become scarce. Which means, he says, that they must now be seen as valuable, limited resources, and allocated efficiently to minimize waste and maximize their benefits.

He then devotes nearly half of the poem (383 of 828 verses) to suggesting how that could and should be done.

He starts with the concept of hard work.

We humans have a natural inclination for leisure, he says, stemming somehow from our earlier existence in the Golden Age. But this desire for leisure is not useful in the real world of limited resources. To live a good and comfortable life, he says, we must reject our impulse for leisure and embrace a strong work ethic. We must, in other words, accept that we are not entitled to anything. We must accept labor as our natural duty and the natural way to have a happy and prosperous life.

Next, we must embrace the idea of saving. In order to contend with winters, droughts, and pestilence, we must work harder and longer during times of plenty to produce a surplus, which we should then save for our future needs.

This commitment to labor and saving, Hesiod contends, gives rise to an innate human ethic. Recognizing the value of work, he says, men develop a deep-seated emotional disapproval of sloth. This, combined with wanting what their neighbors have, creates a desire to emulate what their neighbors do to accumulate wealth.

“To Hesiod,” Rothbard explains, “[this] emulation leads to the healthy development of a spirit of competition, which he calls ‘good conflict,’ a vital force in relieving the basic problem of scarcity.” And “to keep competition just and harmonious, Hesiod vigorously excludes such unjust methods of acquiring wealth as robbery, and advocates a rule of law… to allow competition to develop within a matrix of harmony and justice.”

So, there you have it…

Deep within the human psyche is the memory of Edenic bliss – a world of unlimited abundance where leisure was the natural state of man. We don’t live in that world now, and yet the memory haunts us.

There is a voice in our heads that tells us we are entitled to everything it offered. That conflicts with our experience and frustrates us.

We yearn irrationally to return to that imagined state, but we cannot go back. We are stuck in the real world.

It is a world of hardship and suffering… but it is also a world of bounty.

We can have that if we like, but it won’t come to us from hoping or praying or believing. There is only one path and that is the path of work. We must work hard and spend frugally and save a portion of the fruits of our labor. We must have the stamina to work harder than we want to. We must have the courage to compete. We must have the discipline to restrain our consumption. And we must have the wisdom to save our profits for when we can no longer successfully compete.

And all this must be done in a community that values individuality, freedom, and the rule of law.

It’s as simple as that.

Hesiod figured this out more than 2500 years ago. In the millennia that have passed since then, all sorts of theories have been tested and failed.

Work hard. Spend wisely. Save assiduously. Respect the law. There is certainly more to economics than these four rules. But without them, nothing else works.

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