Welcome to Alpeware. I’m sitting in my favorite local pizza joint (Patxi’s on 9th and Irving) waiting for my deep dish pizza (half Matt Caine, half Special with light onions). I brought a portable Bluetooth keyboard that fits in my pocket and my Nexus 6P phone that I selected as my Holiday gift while still at Google. I’m sipping a local IPA and sitting in a booth by myself since my wife is visiting her family in LA saying her goodbyes. We are embarking on an adventure relocating to Europe in the next few weeks. The thought of traveling again excites me. During my time at Google, I used to travel quiet frequently and I remember the feeling I had every time I was at an airport, going through security and waiting to board my plane. I was looking forward to sitting on a plane 10k feet above the ground and having a few hours to kill letting my thoughts go wander. I didn’t know it back then, but now there is a whole movement associated with people traveling across the globe, taking advantage of modern technology allowing humankind to work everywhere bringing their office with them. For a while, I thought Google is going to be the only company I’ll ever work for. I liked the thought of not having to ever interview for a job every again. Little did I know at the time how much a company will change going from 3.5k employees to 60k. I also underestimated how little I knew myself at the time. Thanks to father time and my beautiful wife, I feel like I know myself a lot better. At the very least, I figured out what I do not like and I’m grateful to be privileged to have had the time and support from loved ones to find out what I like doing. I’m also self-aware enough to realize that it’s about the journey and not the destination, that we are constantly evolving and these are good things. Going through the process of uprooting myself again after I thought I had settled invigorates me with energy, some fear and self-doubt but also new motivation pushing myself beyond my comfort zone again. I’m sure pushing 40 has a great deal to do with it. Not only physically, but also realizing that time is limited. So here I am, taking a leap of fate, not knowing what the future will hold, but more excited than ever to find out. I’d like to invite you to join me in my journey to build a location-independent solo business.
I’ve thought long and hard about it. What I’m most fearful of is feeling trapped, shoeboxed into a role, faced with constant repetition of the same grind over and over again. Why limit ourselves when we have the once in a lifetime chance to explore and take advantage of everything life has to offer? The future might look bleak at the moment. As a species, we’ve never faced more challenges than ever before. Neglecting the fact that it’s mostly self-inflicted, it’s also about realizing that there have never been more opportunities. While every generation can say the same thing, there are undeniable facts that we have made huge advancements with regards to how we understand how the world works, how we figured out how to augment humanity through technological advancements empowering individuals. From what I have personally experienced, I can tell that technology is always a step ahead of its application and it takes a considerable amount of time to disseminate the knowledge and a lot of trial and error to make good use of it. I think the time is now and here’s why.
So we have some positive trends giving us access to a larger market, the economy is clearly trending in a different direction and not utilizing technology’s impact to benefit individuals, but rather optimizing for large corporations. This is fairly short sighted on the part of corporations, but also a repeating theme in history as current holders of wealth are protecting their current status. In modern capitalism, you either come up with a way to create new value or you just sit on your current assets and let them collect rent for you sending your lawyers to stifle innovation and change. It’s a lot easier to scale up a share buyback program to keep your evaluation high using essentially free money as opposed to innovate on creating a new market.
You see, capitalism is built on the premise of ever expanding and new markets (Paul Mason’s Postcapitalism a good history lesson how we ended up here). What we can conclude from this is that there is a need under the current system to expand the global market further to include all countries and we are now also seriously considering expanding beyond our planet (see SpaceX’s efforts, Elon Musk’s vision of colonizing Mars, Hollywood movies such as Passenger). There’s some great examples in the tech industry having built networks to allow its participants to create real value to the point of making a living from it. These are early day eBay, Amazon’s affiliate program and Marketplace, Google’s AdSense program for web publishers and AdWords program for selling products and services on the Web, Etsy as a specialized marketplace for hand crafted goods. It used to be technically complicated to build these networks, but the technology has largely been commoditized at this point and the major players have all been opening up their capabilities through services that can be purchased (various cloud offerings from Amazon, Google, Microsoft, Stripe). What remains is largely a marketing problem and finding ways to kickstart the network overcoming the chicken and egg problem inherent in two sided marketplaces.
What does all this mean? Unless there’s a radically new system changing the very fundamentals of doing business in a fiat currency based economy, we will see existing corporations expanding on their monopoly, seeking further consolidation amongst them, leveraging technology to squeeze out efficiencies resulting in fewer employees per dollar earned and aggressively converting fixed costs to variable costs such as replacing fulltime employees with temp workers. This is not a very motivating prospect for a new grad burdened with student debt.
So what can we do about it? We can either hope that the government will somehow find a way to distribute wealth hoarded by corporations to its citizens or we can proactively take matters into our own hands exploiting the system. Since you are here and still reading, I’m assuming the latter is more appealing to you.
So here’s what I concluded myself. Markets are desperate for creators, entrepreneurs, creative individuals, makers and tinkerers. Collecting rent and hoarding assets only works in a market where there are consumers with purchasing power to consume goods and services. Therefore, there is a huge demand for individuals enabling other individuals to participate in value creation and for services simplifying the process. This is where you come in.
The value of any business is generally proportional to its cash flow. This simply means that the more transactions flow through the business, the more opportunity to take a cut of it for itself and the greater the dependency of its participants on that business. In How to be free in an unfree world [AUTHOR?], the author tells the story of converting his full time staff into independent contractors providing the same work as services to the company. This has a positive effect on all participants and the business at the added cost of putting additional burden on each individual with regards to accounting, taxes and licensing since they now each run their own business. This is similar to a holding company on a higher level, but tremendously empowers the individual as they now build out their own brand and are free to offer their services to other businesses. It’s a much better investment long-term, since they can accumulate value and expertise without being tied to a single company that might fire them at any time. They may still lose that contract, but are already setup to participate in the marketplace, so switching costs are lower. The upside is also that now there’s an incentive to provide the service in the most efficient manner and they are encouraged to attract additional clients. It’s a win-win, since the company gets the service at a lower cost with less overhead and the individual builds value for the long haul.
In today’s market, individual contractors are not positioned as well, hence the recommendation to register as a business with its own legal entity separated from the individual. At the very least, an LLC in the US provides a minimal distance between the individual and the business and also allows you to take advantage of business friendly lobbing happening by large corporations. You can start off as a single member LLC and graduate to a S corp as business expands. There’s nothing preventing you from having your own employees if that’s your thing. I will focus on solo businesses here as a start since that’s what I’m personally most interested in and believe it’s the logical consequence if you follow the same train of thought ad absurdum.
You are sold on the arguments and share the same beliefs about status quo and where the economy is heading and its impact on you as an individual. Great, that’s good to hear, so let’s take the bull by the horns.
There’s some basic setup you need to do and we’re focusing on a California based LLC in the US.
Congratulations, you are in business. Having said that, this was the easy part although the boring one. Just follow the steps and be aware that things are moving slow whenever you have to deal with outside dependencies, especially banks and the government.
Now that you have successfully taken care of the plumbing, it’s time for the fun part. We can learn a great deal from the startup world in the Valley and the discoveries they’ve made over the past decade learning it the hard way. We are truly standing on the shoulders of giants and billions of dollars invested in failed hopes and dreams. Paul Graham is in my opinion the most eloquent writer of startup wisdom and also the most cut through the bullshit.
“You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.”
-- Paul Graham
Let’s break this down a bit further.
You’re a solo business, so you have taken care of the first one. Go educate yourself, keep your skills current and build out your professional network. Make sure to allocate time for that. Essential skills you want are basics of Economy, Marketing, Sales, and Accounting. It’s important to understand these topics from a first principle basis. Start with the corresponding Wikipedia articles and go deep where you find an interest. You will eventually want to outsource most of these once things are in a stable state when you can, but always be prepared to step in so nobody can bullshit you. You should also have specialized skills such as Design, Software Development, Writing, Painting, Coaching. Something you have been doing for a long time that sets you apart. Hone that skill. Push yourself.
There’s a few names for this. Others call this the product-market fit. All it really means is you understand who the people are that are willing to pay money for something you can offer them. You can either start with a well defined market or a well defined target audience. This is important for your marketing activities and one of the most important decisions you will make. Don’t worry tho, you just need a starting point and refine from there. You should start with a niche, as small as possible, but no smaller than at least 5 to 50 depending on your price point.
In Finance terms, this is really about keeping your fixed costs as low as possible to help extend your runway so you have more time for trial and error until you find something that generates cashflow. It’s an inverse correlation to how quickly you find something customers want and start paying you money.
Let’s get more specific.
You will face a lot of resistance, people telling you no, people ignoring you and you will go through highs and lows. It will be trial and error. It will be disappointing. That’s OK. It’s supposed to be hard. Stay positive. Fake it until you make it. Then you can reap the fruits of your labor. Here’s the mindset you need to adopt to come out on top on the other end.
Just accept it. You will face adversity. Lots of it. So now that you know, you will expect it. You will know when you do. Pause. Take a moment and remind yourself that you are able to deal with it. Put your problem solving hat on and come up with a plan. Learn how to strive when people tell you it’s not possible and prove them wrong. I once did a month long training camp in Korea during my days as a Taekwondo player. It was the worst experience I’ve ever had in my life. I was exhausted both mentally and physically. I stopped showering since we’re working out 4 times a day, starting at 5am and finishing at 10pm. The players at school we trained at was considered the best school in the country and had produced the most number of world champions. They had enormous pressure to proof themselves every day and they did. What this means in Taekwondo is you kick some serious ass and show no mercy. I got my ass kicked or better my face. We all couldn’t wait to get back to Switzerland. Whenever I face adversity, I remind myself how I felt during that time and everything seems like a piece of cake compared to that training camp. Am I facing an opponent ready to give me a beatdown, waiting for me to slip up? No, wait, I received some negative feedback online from an anonymous person. It’s all good, I can handle it. There is enormous benefit
Remind yourself how far you’ve come and why you are on this journey. Celebrate your milestones and think about what you have already accomplished. Be in the moment and pay it forward. Thank the people around you who support you no matter what. Think about times when you thought you hit rock bottom and raised out of the ashes. Be proud. Say it out loud. I’m proud of you. Hey, you could be sitting in a cubical boxed in between sweaty bodies pushing papers. You are out there building value for yourself and others.
You won’t be able to do it on your own. Don’t confuse being a solo entrepreneur as doing everything yourself. It’s the opposite. You need all the help you can get. If you’re like me, you will usually try to solve any problem yourself at first. This is not generally a bad thing, since it means you care and want to understand. It’s about finding the right balance. Remember when I said you should have a good understanding from first principles? This still applies, but leave the nitty gritty up to the experts. Like any good CEO, go deep when it’s needed and delegate aggressively otherwise so you free up your time to do the more important stuff.