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An informal, stream-of-consciousness reflection on business ideas, events and issues in modern business, modern life and with some specifics to the web-software industry by Paul Tomori, Internet Entrepreneur

Financial Independence Versus Competitive Superiority By Paul Tomori Wednesday, May 19, 2010 at 17:24:36 (EDT) Back in the Fall, I wrote a little blog on The Art of Business in which I questioned the "given" that besting one's competitors should be the focus. I also remarked on how business is more unlike than like war. This is obviously a contrarian viewpoint. Countless books spout about competitive advantage, how to gain it, how to keep it, how to undermine the competition, the benefits of such superiority, the benefits of growing a company large, of having hundreds of people on staff, of having some sort of battle plan for world domination, etc... etc... All of that is perverse. It really is. What are the real questions: Is your company profitable? This does not mean big top-line revenue - it means, of the revenue you have, is there a healthy "net" earnings from all you do? This is extremely important, because the proportion of your net earnings to revenue indicates how efficiently you are running. From there, scaling up, if that is even desirable, can occur more or less through natural continuation of exactly what you are doing Are you happy? What difference does it make if you gain an edge over the other guy if you still can't sleep at night because of the stress of running a "big" operation? What difference does it make if you still don't feel satisfied and that you (falsely) believe only further growth will give you the potential feeling of adequacy that you crave? Do you have stability? I can think of several ways to triple or quadruple top-line revenue in a short period. However, it would require de-stablizing us from our footings. It would also require either an extremely aggressive salesforce (not our style) or angel investment or big marketing dollars (not our style either)... All of which would be a gamble of either our money and time or someone else's money and time. I find neither appealing. Are you working to live or living to work? While I believe that a career or responsibility that involves productive output is essential for human happiness, I also know that it can become an unhealthy obsession. They call it workaholism. I have been there. I am not there anymore and I am much better for it. Unfortunately, I had to do my own rescue and it took too long, but I won't go back. And, funny enough, I get more done, make more income and have overall much better results absent the workaholism than with it. Definitely, sleeping at the office is grossly over-rated. Reading Charlie Munger's biography right now, I came across a quote where he indicated that he simply wanted financial independence as a young man. He was a lawyer and hobby investor before he became a professional investor. He attributes his success to thinking and reading more than excessive "doing". This way, when he executed, he did so with a well-thought-out plan. It was just 3 or 4 smart moves coupled with a discipline and sound philosophy that made him a billionaire. And all he wanted was the security of financial independence. Competitive superiority comes with a lot of balls and chains. It can all be an illusion anyway. Think of how competitively superior Enron was. That came from a perverse pursuit of dominance, instead of simply pursuing sound objectives... a slower growth strategy... a non-leveraged business model... i.e. one that would protect the investments of the people who entrusted their savings to the crooked management. It's funny... by going the slower route, competitive superiority just kind of happens anyway over time. You just don't notice it so much and you enjoy the process by not wearing the rat label and joining the race toward the edge of the cliff... In business, the logical goal should be financial independence, not competitive superiority. Return To Blog Index