Start Up Blog

The Wealth Equation

Posted in entrepreneurship by Steve Sammartino on June 9, 2014

In terms of financial wealth there is an equation which determines the amount money people acquire over their lifetime. And while monetary wealth is only a small part of living a life of great wealth (I prefer the 12 enduring riches) it is certainly worth knowing this equation and applying it to our daily economics. In a modern society a financial existence is unavoidable, and so it make sense to keep tis equation in mind. So here is the Wealth Equation:

(Income – Expenses) x Investment = Wealth

When we look at it like this in such simple terms, it reveal the current path we are on in the most immediate way. We know if we are spending too much. We know if we are not investing at all or in great enough quantity. What’s interesting is that the first element in the equation ‘income’ is not nearly as important as the second two. When we invest in a startup we are sacrificing the size of first number to go big on the investment multiple. Higher risk and higher reward. There are also many examples of people who became rich with low incomes, frugal spending habits and consistent long term investing. It’s all a game of risk tolerance, time and desired reward. One thing for sure is that wealth is impossible when expenses are greater than income. The important thing to know is which path we are chasing before we being the journey.

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Wood chips, sugar & hazelnuts

Posted in entrepreneurship by Steve Sammartino on June 8, 2014

It was recently the 50th birthday of that favourite chocolate spread we sometimes convince ourselves is ok to eat between two piece of bread. Nutella.

Nutella Jar

What a lot of people don’t realise is that Nutella is what it is because they couldn’t afford to make it the way they wanted to. Originally Nutella was a pure chocolate spread, but during the post WW2 era, a time of heavy rationing in Italy, they bulked up the ingredients with hazelnuts. They did this because hazelnuts were plentiful in the local area and much cheaper than cocoa per kilogram. The presence of mind to turn to the woodchips, in this case hazelnuts, and remarket the brand was very clever indeed. The branding was adapted to talk up the nut credentials and make people believe it was actually a hazelnut spread.

In fact it only has 13% hazelnuts and a whopping 52% sugar by volume – ironically about the same amount as the white label on the jar. While I’ll leave the moral discussion on the marketing of Nutella for another blog post, the question it poses for all of us is this:

How do we turn necessary cost cuts or lack of availability of inputs into brand advantage?

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The most obvious startup opportunity in decades is staring us in the face

Posted in entrepreneurship by Steve Sammartino on June 7, 2014

Every now and again there are movements which gather pace and very quickly form industries. Industries which have inevitability about them. Industries which are suited to the startup realm more than they are to corporate giants. Industries in which it is clear to see that a void will be filled and fortunes will be made. The kind of concepts that are who and when, rather than if and how.

The personal computer industry had this in the late 1970’s and early 1980’s. The the media industry was clearly going to be transformed in the 1990’s witht the dot come boom and right now the web of things is a big opportunity that most industries are failing to see, or at least act on. The thing that they are failing to see is that every product people buy is also going to become a tiny computer. So here’s a question entrepreneurs searching for an idea should ask themselves:

How can I turn product X into a computer?

The companies who already make product X probably know it to, but I seriously doubt they’ll do anything about it. Especially if the company was born before the internet. They’re likely to do what they’ve always done; try to make their product cost cheaper than last year, and maintain their market share. It’s what industrialists do as they return a profit to their shareholders while mitigating risk and changing incrementally – or only once the market demands change. Sure, their are more innovative established firms who’ll see this opportunity and act on it, but they’ll be in the minority. This means that the opportunity is a massive white space for entrepreneurs. A white space where you can turn your hobby into a company – by doing exactly what the question asks. Putting a computer onto a product you love. I intend to do it for surfing. And this isn’t some fanciful development years from now it’s already happening:

LIFX did an amazing job making web enable light globes to change the home.

LIXF light globe

The Moxie showerhead has a wifi enabled speaker inside it so you can rock out while bathing.

Moxie wifi speaker Shower head

We’ve also seen connectivity on home locks, sports shoes, cars, and clothing, so why not milk cartons or cricket bats?

In fact, have a look around your home and office – look at something and that thing will be connected to the internet at some point in the next 10 years. Whether the connected technology  will enhance utility, automation, the smart home, e-commerce or feed into the quantified self, it is going to happen. And the entrepreneurs may not even need to make the thing – it might be attached to the product others make. There’s any manner of ways it can be mashed up. And given that these things that will be connected to the internet already exist, with established markets, the exit potential is clear and simple. So the only question remaining is whether or not you’ll do it or watch while other entrepreneurs fill the void.

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What to do when someone falls asleep during your presentation

Posted in entrepreneurship by Steve Sammartino on June 6, 2014

I do a lot of public speaking. When I am presenting to a large audience there isn’t a presentation where I don’t spot a person who has actually fallen asleep. Now you might think I am crazy admitting it here, but I know it has nothing to do with me. In fact, I’ve had people fall asleep and after the talk others come up and tell me it was the best presentation they’ve ever seen. Every experienced public speaker also knows this to be an inevitable reality when they hit the stage – even during the performance of a life time. The weird thing is that anyone speaking always spots the sleeper – we must have some kind of genetic disposition to finding closed eyes, even in a sea of people.

So, what to do about it when someone does fall asleep during your presentation?

Rule Number 1: Remember it has nothing to do with your talk.

We need to remember the the reason people fall asleep when sitting, standing and not lying down is because they are exhausted, not bored. Some things to remember on this point: They have probably had young kids screaming late at night and didn’t get any sleep. They might have had to catch an early flight to get there for the day. They might have been up socialising at the conference to the wee hours of the morning. They probably haven’t had any fresh air all day being stuck in hotel conference rooms. They have a stomach full of heavy food. The venture capitalist has probably sat through 24 other pitches back to back that day. And they probably had some other factor which made them exhausted. Boredom leads to imagination, distraction and people talking among themselves, not sleep. The evidence will most often be the 99% of people loving your talk, while at the same time this person sleeps. I can remember 2 times I fell alseep while listening to two of my favourite public speakers; Steven Wright the comedian who I absolutely love and Will Ferrell during his broadway show on George W Bush – You’re Welcome America. Which both were absolutely hilarious. But both times I happened to have jet lag, and the jet lag won.

Rule Number 2: Don’t obsess over them – ignore it.

No it won’t go away if you ignore it. But your performance will go away if you don’t ignore it. Remember it is not their fault, or yours, it just is. The presentation is for the person nodding their head, looking you in the eye, the person on the edge of their seat. They deserve your full attention and continued focus on the job at hand.

In the end, what we need to focus on is what we can control, and rarely is this issue something in our control. Sure, if an entire room disengages, go back and work on your speaking craft, get better. But the most important thing we can realise when dealing with people and audiences is this: we are not the only force impacting peoples reactions to immediate world around them.

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False Positives

Posted in entrepreneurship by Steve Sammartino on June 5, 2014

The promise of online advertising was the ability to find an audience based on interests more that just demographic profile. An audience based on interests. This advertisement below appeared in my twitter stream which not only gave me a little chuckle, but reminded me that the web is full of false positives.

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As a reminder a false positive is a a test result which wrongly indicates that a particular condition or attribute is present.  No I am not a One Direction fan. I have never mentioned them in a tweet. But I do very often tweet about music and music videos and use such hashtags. Clearly I’ve been incorrectly identified in one of the parameters for the advertising as being a potential teenie bopper.

It reminds us to think through what the web tells as and to use our own internal analytics to tester, our brain, to see if what it is telling us is valid.

A key word is used in social media might actually mean the person doesn’t like it and the keywords were among other derogatory sentiments. The number of followers and readers we have in a social forum doesn’t necessarily mean we have that many followers of readers. It just means people clicked a button once upon a time. I have over 5000 twitter followers, but I’m certain only a small percentage of that ever see my tweets. My weekly twitter report tells me this as do the number of clicks the links I post in my tweets get (which I track). Not to mention that anyones tweets can now be muted with no one knowing.

Numbers do not necessarily equal caring. It’s also true that media organisations through the ages have used these grey areas to create massive profitability. And even though the technology is getting better at giving us a more accurate measure, there is a still a long way to go. It’s worth remembering that the actions and interactions are what matters, not the numbers.

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The competition is invisible

Posted in entrepreneurship by Steve Sammartino on May 29, 2014

I recently saw a prototype for the Google self drive car – It’s picture is below and looks kinda cute / cool / weird.

Screen Shot 2014-05-29 at 9.50.12 am

Anyone who follows the technology world will know that Google have successfully driven their self drive cars without incident for more than million miles. But up until now, the cars have been retro fitted Toyota and Lexus’s – other companies cars they fitted their self drive technology to. This is a bit of a shift in the projects trajectory. The Google car, is quite It’s further proof that information, when distributed freely and easily changes the physical world too. That dramatic changes in information, have dramatic impacts on all things physical. But what it should remind business people is that we simply can’t know who our competitors are any more. In a world where everyone has access to all the major factors of production we end up with a global demarcation dispute. Non linear competition where brands and big businesses get blindsided by category newbies. We’ve already seen it in retail, music and media, and we are about to see it in every form of hardware and manufacturing. The established industries who should, could and would provide the next level of innovation probably wont.

Tesla is already around half the size in market capitalisation of GM and Ford after a few short years in the market. And as we can see by this post the auto industry better get ready for new players from the technology world – Google, and possibly even Apple. The auto industry would do well to remember that cars are about to become mobile lounge rooms, and all the high tech companies are already competing for the ‘lounge room’ in the house. Next they’ll be competing for the lounge room in transit. A preemptive sense of future irony right there. Even small players like Tomcar Australia (which I have an interest in) have proven you don’t need to own a factory to make best in category vehicles and disrupt an established industry base.

I also read yesterday about two absolute powerhouse Australian companies (both in the top 10) Coles and Woolworths better get ready for a new set of competitors. And while they mentioned a siphoning of revenue category by category, I believe they have a much bigger problem coming their way:

What to do with 1000+ stores when no one goes to a grocery store to get their shopping.

And no, this is not like discretionary retail which can be made a social, fun and entertaining experience. Grocery shopping is a chore and technology has a habit of removing chores from the human experience. Not many people run fast or lift heavy things for a living. And mind you, the word computer, was originally a job title, not a machine.

In the food industry there is a term called ‘share of stomach’. What share did the food company get of the stomach. Which is the type of measure which is used to assess the truth about who the competition is, and where the revenue threats lie. I feel as though every industry needs to develop their own ‘Share of Stomach’ metric so they can see the real change in their industry. Maybe all industries related to transport need to measure share of human movement? Self driving cars, aren’t just a competitive play against legacy auto industries, but it’s hard to see city car parks being a valid business when we can ‘send our car home to our driveway’ and get it to pick us up later. It also raises questions about what relatively new businesses like Uber will do when cars don’t need drivers? Chances are they’ll need to become a system which organises and delivers our cars?

Just like life, the real life threatening diseases are from entities our body hasn’t encountered before and built a natural defence against. At times like these, a tectonic shift, business would do well remember lessons from the natural world.

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Celebrity in a post mass media world

Posted in entrepreneurship by Steve Sammartino on May 26, 2014

If you had to name a famous person, in a particular category of fame, just 20 years ago, there was a very good chance that all of us would have known the person named. The famous Television Host, Actor, Rock star, Author, Politician, Activist… we all had an understanding of who the ‘famous people were’ in the mainstream categories. It’s still true that we know who the super famous people are in most categories. But as every day passes, fame is starting to become less defined by media owners and more defined by media users. Those with the fame got handed the stage, the microphone, the printing press, the camera and held one of the few positions available. They got picked by the owners of the factors of influence. But now we can pick who we want to care about, and that means one thing:

Fame is fragmenting.

The word famous itself derives from the latin word fāma which means to talk. And now that we can all talk to the public, fame is decided by who we think is worth listening to. I recently had two such situations where I interacted with famous people – famous to me anyway. People whose opinions and work I value. A simple twitter interaction, albeit micro with Tom Peters and Marc Andreessen.

Screen Shot 2014-05-24 at 9.26.41 pm Screen Shot 2014-05-22 at 4.51.15 pm

Guys like these are my Justin Bieber, and I hate myself for writing his name in my blog – but unfortunately he was the best example to make the point. And while I couldn’t name even one recording artist in the current top 10, or who is on Free To Air TV at 7.30pm weeknights, I still have my own set of famous people, or celebrities I look up to in my niche world. I also know that as time goes by this will be the norm, rather than the exception. Fame will become a community by community proposition. It’s not without some irony that high technology is reversing many of the social and economic structures back to our pre industrial reality.

For me this is another reason to be excited by the technology revolution. We are starting to get back to a more valid definition of celebrity – People who have a positive influence in our lives, not just those who occupy a limited number media channels.

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Amazing list of psychology life hacks you can implement immediately

Posted in entrepreneurship by Steve Sammartino on May 25, 2014

1. Primacy and recency:

People most remember the first and last things to occur, and barely the middle. When scheduling an interview, ask what times the employer is interviewing and try to be first or last.

2. If you work in a bar or in customer service of any kind:

Put a mirror behind you at the counter. This way angry customers who approach you will have to see themselves in the mirror behind you and the chances of them behaving irrationally lowers significantly.

3. Once you make the sales pitch, don’t say anything else:

This works in sales, but it can also be applied in other ways. My boss at an old job was training me and just giving me pointers. I was working at a gym trying to sell memberships. He told me that once I got all the small talk out of the way and presented the prices, that the first person to talk will lose. It didn’t seem like a big deal but it actually worked. Often there were long periods of awkward silence as the person tried to come up with some excuse, but usually they bought.

4. If you ask someone a question and they only partially answer, just wait:

If you stay silent and keep eye contact they will usually continue talking.

5. Chew gum when you’re approaching a situation that would make you nervous like public speaking or bungee jumping:

If we are eating , something in our brain reasons ‘I would not be eating if I were danger. So I’m not in danger’. It has helped me to stay calm a few times.

6. People will always remember not what you said but how you made them feel:

Also most people like talking about themselves so ask lots of questions about them.

7. When you’re learning something new, teach it to a friend . Let them ask questions to you related to it:

If you’re able to teach something well, you can be sure that you’ve understood it very well.

8. If you get yourself to be really happy and excited to see other people, they will react the same to you:

It doesn’t always happen the first time, but it will definitely happen next time.

9. The physical effects of stress – breathing rate and heart rate – are almost identical to the physical effects of courage:

When your feeling stressed from any situation immediately reframe it : Your body is getting ready to be courageous, it will NOT feeling stressed.

10. Pay attention to people’s feet:

If you approach two people in the middle of a conversation, and they only turn their torsos and not their feet, they don’t want you to join in the conversation. Similarly if you are in a conversation with a coworker who you think is paying attention to you and their torso is turned towards you but their feet are facing in another direction, they want the conversation to end.

11. Fake it till you make it ; confidence is more important than knowledge:

Don’t be intimidated by anyone, everyone is playing a role and wearing a mask.

12. If you pretend to be something for long enough, you will eventually become it:

13. Not to be creepy, but if you want to stare at someone unashamedly, look directly past them and wait for them to try and meet your eyes:

When they fail to do that, they’ll look around (usually nervously for a second) they won’t look at you again for some time. This is your chance to straight up stare at this person for at least 45 seconds. If you’re staring at someone and get caught, DON’T turn your head or your body to look away, because that just confirms that you were staring. Just move your EYEBALLS off the person. Unlike turning your head, it’s instantaneous. And the person will think you were just looking at something behind them and that they were mistaken for thinking you were staring. Do it confidently, and ignore any reaction from the person, and you can sell it every single time. After a second you can even look back at them with a “Why are you staring at me?” look on your face to really cement the deal!

14. Build a network:

Become their information source, and let them be yours. Even grabbing a beer with a former colleague once a year will keep you in the loop at the old office. Former coworkers might have gotten a new position in that office you always wanted to work in, great! Go to them for a beer, and ask about the office. It’s all about connections and information.

15. If you are angry at the person in front of you driving like a grandmother:

Pretend it is your grandmother, it will significantly reduce your road rage

16. Stand up straight:

No slouching, hands out of pockets, and head held up high. It’s not just a cliche — you literally feel better and people around you feel more confident in you.

17. Avoid saying “I think,” and “I believe” unless absolutely necessary:

These are phrases that do not evoke confidence, and will literally do you no good.

18. When feeling anxious, clean up your home or work space:

You will feel happier and more accomplished than before.

 19. Always buy the first pitcher or round of drinks:

You’d be surprised how long you can drink on the phrase “I bought the first one.”

20. Going into an interview…be interested in your interviewers:

If you focus on learning about them you seem more interesting and dynamic. (Again, people love to talk about themselves.)

21. Pay Attention Parents:

Always give your kid a choice that makes them think they are in control. For instance when I want him to put his shoes on I will say ,”do you want to put your star wars shoes on or your shark shoes on?” Pro-tip: In some cases, this works on adults.

 22. Your action affect your attitudes more than your attitudes affect your actions:

As my former teacher said “You can jump and dance FOR joy, but you can also jump and dance yourself joyful.”

23. When a group of people laugh, people will instinctively look at the person they feel closest to in that group:

24. If you want to build rapport or gain someone’s trust quickly, match their body posture and position:

If someone is sitting with her legs crossed cross your legs. If they’re leaning away from you lean away from them. If they’re leaning towards you, lean towards them. Mirroring and matching body position is a subconscious way to tell if someone trusts you or is comfortable with you. If you’re sitting with your arms crossed and you notice someone else is sitting with her arms crossed, that is a good indicator that you have/are successfully built/building rapport with that person.

25. The Benjamin Franklin Effect:

The pencil one may seem far-fetched but I find the basis of it (the Benjamin Franklin effect) is very useful and extends far beyond pencil borrowing.  This knowledge is useful in the world of flirting too. Asking a girl in your class if you can borrow a pencil or her notes or to explain the homework will make her more likely to like you than if you let her borrow your stuff or are the one to help her. Even just asking a girl to buy you drinks (facetiously) leaves a much bigger impression than offering to or actually buying a girl a drink.  The best part is it kills 3 birds with one stone: you get the advantages of the favor itself, the person subconsciously likes you more, and it makes them more open to future favors and conversation.

26. Handling Panic and Anxiety Behavior: 

When you’re feeling stressed, worried or angry, tap each finger tip while thinking (or speaking quietly) a few specific words about what is bothering you. Repeat the same words while tapping each of your 10 fingers, including thumbs. For example, tap while saying, “I’m so angry with her…” Doing so will likely take the charge out of the feeling and return you to a more resourceful (better feeling) state of being. It’s called EFT (Emotional Freedom Technique) or “tapping,” and it is useful in many, many life situations – emotional upset, physical pain, food cravings, traumatic memories…

This list came via Quora and is total gold that had to be shared.

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The early money & the long money

Posted in entrepreneurship by Steve Sammartino on May 21, 2014

When we hear about startups that have gone on to be huge successes the mind often gravitates to all those early investors. Those who had a seat at the table in the angel rounds, those who knew the founders and got in early enough to make some serious money. It’s a natural reaction when companies go on to reach the unicorn level. It is true that people who get in early always make more money. Late money often pays a premium as future expectations (when positive) are priced into the investment.

But there is actually a way to become an early investor even when you are late to the party. The way to do it, is to be a long investor.

If we invest long, then by default we arrive early.

When we invest in something for the long haul, we eventually become an early investor. Even if the investment vehicle was well established when we arrived and got involved. If we stay long enough the price becomes cheap through the dual benefits of inflation & compounding. Just ask your parents what price they bought their first house for and you’ll see the relationship between long and early investing. It also works for quality stocks too. While very few people indeed got to invest in Google before their IPO, those who bought the stock on the open market once the stock was publicly traded would have made more than 6 times their original investment in 10 years.

When we start to invest in 10 year plus timelines all manner of investments from property to index funds provide outsized returns. And while we may not be clever enough to invest in something that grows quickly, we can be smart enough to invest in something long enough for it to become early.

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The ultimate time management lesson

Posted in entrepreneurship by Steve Sammartino on May 19, 2014

There’s a lot to know about time management, and even when we know it all, it’s pretty hard to implement. But if I had to impart a single thought on the subject of time management it would be this:

If the years seem to be passing quicker and quicker, it is because they are.

Yep, you read that correctly, each year we live is shorter than the previous year. That’s because everything we experience in humanity is experienced in relative terms. What we compare things to is what really matters. Our financial position, our height, our intelligence, our health… everything is compared to something. And so too are the years we live. The relativity of each year we live is a smaller percentage of the life we’ve already lived. This is why years seems shorter and shorter, and in relative terms, they are. For example, 1 year in a 10 year olds life amounts to 10% of the life already lived. While 1 year of a 40 year old is .25% of the life already lived.

For me this is a nice reminder that time is constantly running out. And we should make a concerted effort to get as much out of it as we can, even if that means we want more down time. The point is that we should make conscious choices on how we use our time, not just let it evaporate. I recently did a podcast on the topic of time management on the Beers Blokes and Business show. You can listen to it here.

And here’s one more doozy to close off with – you’ll never be as young as you are today. So get out there and make a ruckus.

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