The fundamental business of the Knowledge Economy

K2$

The above is a symbol I created to represent the fundamental business model of the Knowledge Economy, which will become increasingly more cerebral as the Web 2.0 emerges.

K2$ stands for "knowledge-to-cash." It refers to the technologies, methodologies, processes, etc. that convert knowledge into cash.

It takes a lot of skill to be able to charge people for one's knowledge. Consultants, of course, have mastered this art. If you are a good consultant (especially to C-level executives), the minute you open your mouth, money starts pouring into your pocket.

Most professionals are not able to charge other people for their knowledge. The critical skill they are lacking is the ability to convert their tacit knowledge into explicit knowledge.

Of course, it does take a lot of training to be able to accurately depict one's knowledge on a piece of paper. But once this capability -- which I call the literary capture of knowledge -- is secured, one's fortune is made, because the explicit knowledge can then be easily shared with a limitless audience via the Web. The velocity at which this explicit knowledge is shared, of course, depends on the marketing skill deployed or hired.

Why is success difficult?

It’s so simple to be happy, but so difficult to be simple.
—Gururaj Ananda Yogi

I guess it's the same with success: it's so simple to be successful, but so difficult to be simple.

Maybe this is why the movie Forrest Gump has such appeal. We all want to believe that success is simple, and just a matter of always doing what is right.

We often tend to think that success is a matter of using our mind, when it is perhaps just a matter of liberating our heart. Perhaps success is just a matter of helping ourselves become who we truly are.

But this is not easy. After all, we live in a "man's world" where showing your true emotions is not always well perceived. In fact, in many executive circles, any sign of emotion is likely to be interpreted as a sign of weakness.

In my own life, it is only recently that I have learned to follow my heart while using my brain. I've always trusted the logic of my mind. Now, I have to learn to trust the magic that can only come from the heart.

Talent vs career

There's much talk about the War for Talent.

But what is talent? It dawned on me only recently that a talent is the beginning of a career, whereas a career is the exploitation (by both the employee and the employer) of that talent throughout the course of a human life.

The talent is the Yang, the career is the Yin -- the receptive environment that enables the talent to grow.

From the above, I conclude that it is not enough to have talent. One must have the courage to persevere through much hardship in order to convert that talent into a career.

On the other hand -- and this is quite tragic -- many people have the courage to persevere and go to work every day and work hard, however they have not yet clearly identified their talent. While they think they have a career, they merely have a job.

There's nothing wrong, of course, with having a job. It's the responsible thing to do. But I tend to think that we are all born for a worthwhile career that provides opportunities for self-actualization. One's work life, after all, occupies the single largest block of time in any human life.

What "making money" really means, Part II

The expression "I want to make a lot of money!" makes as much sense as a guy saying "I want to have a lot of sex!".

This would be a logical thing to say if the Earth was filled with nymphomaniacs ready to give themselves to a guy without requiring him to do anything resembling a romantic effort.

Just as "making money" is a two-step process (creating value and delivering value), "having lots of you-know-what" could also be broken down into two essential steps (for a man):

1. He has to build himself into a trustworthy, interesting, credible, professionally ambitious and financially capable gentleman (of course, the precise mix of these requirements depends on each woman)
2. He has to make himself known to many women

This reminds me of the formal definition of marketing: "the management process of identifying, anticipating and satisfying customer requirements profitably."

In this case, it would be modified to "the management process of identifying, anticipating and satisfying female requirements romantically."

In the case of women who want to seduce men, the definition of self-marketing might be quite different: "the theatrical process of creating a mysterious entity that would captivate the male imagination."

In fact, this is precisely how top model Natalia Vodianova seduced her aristocratic husband. Although she came from a poor family, her grandmother always inculcated in her a love of culture and theatre. She leveraged this beautifully when she met him at a prestigious reception, and managed to captivate his imagination. He would later "complain" that she made him wait two whole months before their first kiss!

Where am I going with this? Oh yes, my point is: the more a person thinks about "making money", the less likely he/she will make any -- in the same way that a guy who's obsessed about sex, will rarely find women who will indulge his fantasy.

I guess Einstein said it best: "Try not to become a man of success, but rather to become a man of value."

What "making money" really means, Part I

Everybody wants to win, yet very few people are willing to PREPARE to win.

Why? Probably because during the preparation period, you don't get paid any money and don't get any recognition. So why bother?

Yet we see plenty of examples of people who set a goal and work tirelessly toward achieving that goal (even when family and friends often are not as supportive as expected).

Athletes practicing for years just to be able to compete in the Olympics, for example. Or artists who struggle for years without knowing for sure if they'll ever be able to realize their dreams.

Different people have different tricks that work for them, and induce in them the motivation to practice and perform.

In my case, my little trick is to create a situation where I'm "forced" to perform a little every day. For example, by writing several blogs (including this one) where people (many of whom I've never met) can actually subscribe to, I'm forced to write at least 3-5 times a week.

Why does having subscribers motivate me? Because I simply don't want to disappoint anyone. Like most people, I hate rejection, and I sure don't want any of my subscribers to cancel their subscription!

(By the way, I mentioned a while ago a secret little book that teaches how to profit from the information age. Here it is: The Intelligence Edge, by George Friedman. If you don't have time to read it, I'll post a summary of the book shortly. But if you do have time, I highly recommend reading it from cover to cover. It has truly opened by eyes about how to profitably manage information.)

Sure, blogging is not where I make a lot of money, but at the same time, it's not difficult for me to see that with a ghost writer, I could end up publishing a book that contains ALL the entries here, and sell it to people worldwide for a few dollars.

I believe so because I recently had an insight: "making money" is actually a two-step process:

1. First, you "earn" the money (that is, you work hard to create something that other people value enough to pay you for it)
2. Second, you distribute your value to the world

This is why the expression "I want to make a lot of money!" doesn't make sense. It would be more accurate -- and instructional -- to say "I want to create a lot of value", followed by "I want to let the maximum number of people know about that value and receive it so it can improve their lives."

That was actually the first lesson that billionaire Donald Trump taught his apprentices in the first episode of the show The Apprentice: he gave the 16 participants $200 and told them to buy cups, lemons, etc. and start selling lemonade on the streets of New York!

Their first billion dollars...

How long did it take them to make their first billion?

• Henry Ford, 23 years
• Sam Walton, 20 years
• Bill Gates, 12 years
• Jeff Bezos, 3 years

Source: Future Living, by Frank Feather

It's interesting to note that they all used a system* to build their fortune (assembly line system, logistics system, computer operating system, e-commerce system).

It's also interesting to note that what they were selling got smaller and smaller -- from cars to consumer products to software CDs to pure bits and electrons (Amazon doesn't sell anything, it's just a Web interface for conducting e-commerce).

* Robert Allen coined the acronym S.Y.S.T.E.M., meaning Save Your Self Time, Energy & Money.

A secret about selling

Success in most fields depends on selling ability. Even if you are a nuclear physicist, you still need at least ONE person who believes in the value of your work, and is willing to back you up financially. But you've got to sell to him first.

So if success depends on selling ability, what does selling ability depend on?

An insight I just had five minutes ago, is that you've got to find out the other person's "secret numbers." Everybody has secret numbers, or "hot buttons" if you will.

If John's secret numbers are 24985, and Jane is trying to sell to him a product by repeating 39252, there is no way she will ever succeed.

Stephanie is a little smarter. She proceeds step by step. She throws all kinds of numbers at John, and somehow notices that he pays attention when she says "3", and even more when she says "2."

"Aha!" Stephanie says to herself. "I've got at least one number that gets a response from him!"

And over the course of the following get-togethers, she carefully and casually tries out several other numbers and discovers, in a similar fashion, John's other three numbers (498).

Of course, by this time, John feels that Stephanie totally understands him and cares a great deal about him, so even if she gets the last number (5) wrong, it doesn't matter. John is ready to buy whatever Stephanie is selling.

Of course, this illustration is a gross approximation of the real selling process, but it does point to the need to go about the selling process in a systematic fashion. At each step of the process, you either get it right or you get it wrong. The trick is to pay attention to the prospect's signal, which will tell you whether you're going in the right direction or not.

(Savvy readers will notice, of course, that the more expensive the item to be sold, the more numbers the seller must "decode.")

The media is the wealth

McLuhan was right that the media is the message. But more importantly today, the media is the wealth.

Especially for knowledge workers.

The media is the wealth because through Web-based technologies like blog publishing and RSS feeds, a knowledge worker can distribute his expertise and intellectual capital to a virtually limitless market worldwide.

(A few years ago, I even coined a word -- EXPORTISE -- to capture the idea that someone's expertise could be in a format (digital file, CD ROM, DVD, audiotape, paper, mind map, etc.) that is easy to export.)

The key, of course, is to master literary techniques and devices so that you not only share your expertise with people (potential clients!), but also entertain them at the same time.

"Fun" is key to effective knowledge-sharing because, quite simply, nobody says no to fun!

If writing is not your thing, you could also maintain a video blog or an audio blog, so that you can share your knowledge via voice or video (check HERE for seeing the trends.)

Although the Internet could make you immensely rich or popular (preferrably both!), the main challenge is to package your knowledge so that it's useful (easy to use) for your readers.

The ultimate test as to whether your blog or video/audio blog has useful information is quite simple: count the number of people who subscribe to your blog.

Trust me, this is a necessary test to get rid of the widespread illusion among bloggers that what they are writing is useful or interesting. If nobody subscribes to your blog, you could probably spend your time doing more productive things.

The key to success in blogging, and in making money by sharing your "exportise", is to constantly ask people if the information you're sharing is USEFUL to them. Sure, it takes a lot of courage to face the truth, but once the truth becomes your ally and your guide, there is nothing on Earth that can stop you from realizing your dream.

The important thing to remember is that "the media is the wealth." By mastering ways to capture your knowledge in a media format easily distributed around the world, you will master the best way to create wealth.

How bad do you want it?

A young man once went to Socrates and asked him how he could gain wisdom. Socrates replied by asking the young man to come with him while they walked together into a nearby lake. When the water got to be about four feet deep, Socrates suddenly grabbed the young man and pushed his head under the water. Then he held it there. The young man thought it was a joke at first and did not resist. But as he was held under the water longer and longer, he became frantic. He struggled desperately to get free as his lungs burned for lack of oxygen. Finally Socrates let him up, coughing and spluttering and gasping for air. Socrates then said, "When you desire wisdom with the same intensity that you desired to breathe, then nothing will stop you from getting it. "

Source: Maximum Achievement, by Brian Tracy

People succeed not so much because they want to, but because they have to. This explains why Vietnam, a small nation, was able to defeat a super power like the United States. Indeed, the Vietnam War was more central to the South Vietnamese people than it was for the Americans.

"Central" in the sense of "essential for survival." This centrality ensured the total commitment of the Viet Cong. In his movie Apocalypse Now, Francis Ford Coppola has Colonel Walter E. Kurtz express admiration for the ruthless clarity of mind exuded by the Viet Cong: "If I had ten divisions of those men, the war would be over very quickly."

Given the rising economic power of China and India, it is difficult to see how North American workers can compete UNLESS they develop a stronger commitment toward their job performance and career focus.

This posting is the 75th, and I could go on sharing all the best success secrets in the world until I finally publish this blog in book format. Yet, it won't make a difference unless people decide, once and for all, that success is a must and that failure is not an option.

Difference between "work" and "job"

In his latest book, Before You Quit Your Job, Robert Kiyosaki talks about the difference between "work" and "job."

Work is like homework. It's when you train yourself, when you prepare yourself. A job is when you actually perform and get paid for it.

Most people want a job, but are not willing to do the required "work" in order to get the job.

Similarly, most people want to succeed (in business or in their career), but are not willing to put in the effort, the time, the energy.

Kiyosaki also accurately describes two types of people: those who only look for jobs. If there's no job opening, they won't do any work.

Then there are entrepreneurs who see "work" to be done everywhere! They see so many problems in society, and all these problems are opportunities waiting for a smart entrepreneur to exploit them for profit!

Here's a concrete example: the creative people at Progressive (www.progressive.com) thought they'd do a lot of work just to show future customers how helpful they want to be. So they created an information system that gathers all the competitive offerings and quotes! They did the work so that their (future) customers don't have to!

Obviously, they understand the difference between "work" and "job." They "work" hard in order to get the "job."

A TV ad shows a Progressive spokesperson saying: "If they're this helpful to you, imagine how helpful they'll be when you become a customer."

Getting information vs using it

"Getting information is administrative, using it is strategic."

This powerful truth reminds me of the scene in the movie Crouching Tiger Hidden Dragon, where the masterful Li Mu Bai is fighting the young, highly talented aristocratic girl Jen. She's holding the famed sword Green Destiny, whereas he's wielding a... branch from a tree!

Yet, he was able to effortlessly defeat her.

The lesson I've learned is that information is merely a tool. Victory depends on how skillful is the mind that is contemplating the information and is applying it in a specific context.

Yet this super-strategic skill is taught nowhere. Peter Drucker in fact bemoaned the lack of "information literacy" at the workplace, at a critical time when knowledge is rapidly becoming THE ultimate resource in creating value.

However, despair not: there is one "secret" book that teaches how to find and leverage information for profit.

(To be continued...)

Welcome to the Olympic economy

A few days ago, I was watching on TV the Olympics in Torino when the commentator shouted something that surprised me and that I'll never forget. An Olympic skier was speeding downhill when he suddenly skidded on a curve.

The commentator said: "Oh my God, he wasted so much time -- a whole second!"

I think the new globalized economy will be that intense. Every second will count. This is more or less the message that Tom Friedman delivered in his book The World is Flat - A brief history of the 21st century.

(Well, "brief" is an inaccurate subtitle, because the book is actually 469 pages!).

Friedman could have used another title for his book: "Let the Games begin!"

Or "Welcome to the Olympic Economy."

The point is, we live in a truly global economy, where any knowledge worker on the planet can compete directly against any other knowledge worker.

The remedy, Friedman says, is to constantly upgrade your skills and learn new ones.

The problem, of course, is that companies only train employees to become better at their job. The skills acquired may or may not be useful from a career standpoint. For example, employers will rarely teach employees how to network, negotiate, or anything that can increase the worker's career options and mobility.

It would be like a husband teaching his wife how to seduce other men!

I fear that unless people wake up to the new reality of a global economy, they will not take the appropriate actions to equip themselves with the very best knowledge and skills in order to succeed in the intensely competitive economy.

Living like a king

"An idea in the hands of talent, becomes capital."

When I first read it, I found that statement intriguing. Does it mean that "an idea in the hands of ordinary people, remains just an idea"?

Then I remembered having seen, in the news, many successful business ventures based on ideas that I had years ago. Why didn't I implement the idea in the marketplace? I could have become rich...

The truth is, I lacked courage. Or I had an abundance of self-doubts -- which is more or less the same as lacking courage.

It is only recently that I've discovered the truth that most people have at least one talent, but also that most people lack the courage to execute an idea they have.

I think an idea is just a football. Yes, you need someone to throw you that football, or maybe you're skillful enough to intercept it from the other team. But you still have to run FAST and FURIOUSLY across the football field to score a touchdown!

In the end, the self-made billionaire Ross Perot put it best: "It just takes one idea to live like a king for the rest of your life."

Does capitalism work for you?

SUMMARY

After the end of communism in 1989, we know that the only economic system that has a chance is capitalism. Yet, capitalism may work for a small number of people -- the financial and managerial elite, but does it work for you?

DETAILS

I recently went to a seminar where I shared my story with participants about how, in June 2000, I realized that capitalism doesn't work for me.

I was employed at a company and was generating significant revenues from a corporate account that was neglected. Yet, as I saw the revenues from that account increase, my paycheque remained the same. In fact, I was so good (excuse my modesty) and sold to so many clients that I had to give some of my clients to a friend in the sales department.

It was only years later, while reading a book on capitalism and Marx, that I realized that the growing difference between my fixed salary and the increasing revenues I was producing was what is called the "profit rate."

This, ladies and gentlemen, is how the rich get richer and the poor employees remain poor.

Employees work hard, day in, day out, until they reach retirement age. At that point, they basically retire from a game they never really understood.

That game is called capitalism, and only those who understand the game make money and become rich. Everybody else has to show up at the office and work hard, until the inevitable time when they feel it's no longer worth it and they decide to drop out of the "rat race."

According to Harvard Business Review magazine, 3 out of 20 women with MBAs drop out of the "rat race" after becoming a mother. This is not surprising. Women, more than men, want balance in their lives. Plus, the male culture at corporations is rarely open or receptive to work practices that are women-friendly or mother-friendly.

My point is not to denigrate people who have chosen to be employees. It is probably the best choice, given the fact that very few people have the talents, energy and work ethic to become entrepreneurs and run their business.

My point is only that people should explore all the options available (such as becoming a free agent, launching or buying a business), and then make a decision as to how they will spend their lives. Unfortunately, the educational system only presents one option: get a job.

Over time, people view "having a job" as critical to survival, so it never occurs to them that there are actually 3 other options.

This is mainly why capitalism doesn't work for most people. On the contrary, most people work for capitalism.

In his book Rich Dad Poor Dad, Robert Kiyosaki says that people work for money, because they have never learned how to make money work for them.

He talks about financial literacy. The shocking part to me is that even though I studied three years in business school, I did not learn about business, let alone capitalism. I had to figure it out on my own! I had to learn about the "profit rate" on my own.

I only hope that through this blogzine, I can share the business knowledge I gained both from books and from painful trial and error.

Second Internet Boom

Esther Dyson (www.edventure.com) does extensive research on user-generated value, so there's definitely a major trend there to be leveraged professionally or commercially.

One insight I came across recently is that different Web companies focus on different things: LinkedIn focuses on building people's credibility, whereas Yahoo! Answers (www.answers.yahoo.com) focuses on accountability (through their scoring system) and on the message per se (it doesn't matter who you are, what matters is what you think).

Specifically, LinkedIn users don't say much. They are just building their credibility, and the more credible they seem to be (from their profile, etc.), the more people join their network.

Yahoo! Answers, on the other hand, drives people to express their knowledge, but doesn't provide users with an easy way to connect to one another.

A profitable business can be built by linking these two services.

I feel that a second Internet boom is brewing, and is about to burst into global public consciousness.

The question is, "Who will realize it first and make a fortune?"

P.S. Please forward this blogzine to your friends and family and coworkers. They will appreciate it, as I'm continually posting information of great value for career and business purposes.

How to profit from Yahoo! Answers

You might have already tried Yahoo!'s new service, called Yahoo! Answers.

Initially, it might be quite fun, and even addictive at times. But ultimately, for those who are serious about leveraging the Internet's power to gather people (and not just information), Yahoo! Answers can become a platform for generating extra income.

The secret to making money from services like Yahoo! Answers can be found in a little book by Stan Davis, titled BLUR - The speed of change in a connected economy.

In his book, Davis describes the three major trends that will dramatically affect how we create value (hence money): the rising intangibility of value (such as knowledge), the emerging connectivity (peer-to-peer, etc.) and the speed at which everything moves in the cyber economy.

Something is going on!

Tom Friedman wrote the best-seller The World is Flat, in which he says that every worker in North America is now competing against the smart and hungry workers of India and China (and there are roughly 3 billion of them).

His message is so powerful that even the Bush administration is listening to him.

But there's something else going on, which I can't yet put my finger on. It's about the Web 2.0, which enables people to interact DIRECTLY with millions of other people on the other side of the planet and to collaborate in open-source projects.

Yahoo! Answers (http://answers.yahoo.com) is one such example.

Then, there's PayPal, which enables anyone to pay anyone else who has a PayPal account (which is free to create).

There's also this RSS thing, which enables a person to subscribe to a blog (like this one) and receive daily emails containing recently uploaded postings.

When I mix all the above trends together, I can't help but conclude that:

1. Knowledge is power
2. Power is money
3. Therefore, in the new economy, smart people will be very rich

(More later).

Teach a man how to fish? No way!

Quotation from Harvard Business Review: "Give a man a fish and you feed him for a day. Teach him how to fish and you just lost an employee."

Most people work for someone else, simply because they don't know "how to fish."

That is, they don't know "business", which is all about creating value and delivering value.

(Peter Drucker himself wrote that business is ONLY about innovation and marketing).

Here's the thing: in a corporate setting, you are NOT encouraged to create anything. In fact, people psychologically are not motivated to create anything because they would not get a bigger salary! There is NO incentive for doing things better, or creating new services or products. In fact, you could lose your job if you try to change things! Managers like the status quo, they like predictability, they like to be in control. (Until the day when their organization, like the Titanic, hits some kind of iceberg).

The more enlightened companies encourage employees to be "entrepreneurs" but they don't say anything about how they reward "entrepreneurial thinking and behavior."

The only solution for corporate employees is to start a part-time business and learn from a successful entrepreneur on how he did it.

How to become richer

In his latest book, Rich Kid Smart Kid, Robert Kiyosaki talks about his secret for becoming rich.

Instead of looking for a job, he recommends looking for a way to serve as many people as possible. In his case, the answer was to publish books; this was how he was able to serve more people.

A typical reader reaction might be: "Well, great for him. But I'm not a writer. I wouldn't even know where to go to get my book published, even if I had written one, which I didn't!"

That response would be valid if it wasn't for a new technology which I call "slog" (from "syndicated blog").

Unlike a blog, which is an online journal, a slog has a "subscribe" button so that readers can register their email and receive new blog entries. That's right, they don't even have to visit the blog. They get new postings every day, in their email box!

The best news is, it's all free! www.blogger.com is free, and so is www.bloglet.com

So the answer to the question "How to become richer?" seems to be:

Become smarter!

In other words, develop valuable knowledge that hundreds or thousands of people would like to receive. Then, you can charge them for subscribing to your slog.

This is not a new idea. In fact, one of the top ten most popular millionaire occupations is newsletter publishing.