There was a time when Harry Potter was just a manuscript also. But assets with no established value are 'speculative assets.' Speculative assets are riskier, and we can't delude ourselves on this point.
December 2, 2007: Check out Jon’s podcast update to this chapter, which Jon considers to be the most important chapter in the book.
So what if you accept my argument? What if you concede that the working world has flipped and the real risk is working 9 to 5? Does that mean you quit your job and start your own business tomorrow? Not necessarily.
True, plenty of entrepreneurs were “forced” into starting their own companies through pink slips – myself included – but that can be an icy plunge. It’s not easy to find time to start a company when you’re working full time, but your current salary gives you protection (and early stage financing) during the most vulnerable periods in the startup process.
A big mistake is defining your startup options too narrowly. The business gurus mess this up on their infomercials also. Breaking free from corporate America is about creating assets of your own. But there are all kinds of assets. An asset can be a piece of real estate or a customer database, but it can also be a screenplay or an unpublished manuscript.
Let’s not be dreamy, not all assets are created equal. An unpublished piece of writing or a painting in your basement has questionable market value. In the end, your assets must achieve financial value in order to be deserving of that word. You must take your work to market.
We can think of assets on a continuum, with proven assets such as residential real estate on one extreme and a book of unpublished poems on the other. Accountants might even call some of these assets “intangible,” but I don’t agree. It’s hard to say what’s intangible these days. Goodwill and business reputation, for example, used to be considered intangible assets, downgraded accordingly when businesses were acquired. But in the branding age, it’s the hard-to-quantify brand name of a business that dictates much of its purchase price during an acquisition. (Many point to the acquisition of Kraft by Philip Morris in 1988 for $12.9 billion – six times Kraft’s net asset value – as the dawn of a “new age” in the perceived value of intangible assets such as brand names).
It’s fair game to devote your energy to the creation of assets which have an uncertain market value. There was a time when Harry Potter was just a manuscript also. But assets with no established value are “speculative assets.” Speculative assets are riskier, and we can’t delude ourselves on this point. But here’s the good news: there are ways to moderate that risk.
Just how speculative an asset is depends on a host of factors, including your marketing skills, budget, and creative talent. This book is a speculative asset; I have no idea how it will be received. Since I do make money on my other books, I hope to make money on this book also. But there is always a risk when you devote time to creating something without a proven market.
In theory, I could have reduced my risk if I had stopped writing after a few chatpers and secured a book deal, perhaps through an agent. If I had held off on sinking more time into this project until I had financing from a publisher, then I could have reduced the risk by receiving a cash advance for the time invested.
When you find a third party willing to mitigate your risk, they will ask for a healthy piece in return. That’s why the “upside” for this book is significantly higher if I either (a) sell it through my company (at a much higher net margin than I could get from a larger publisher), or (b) wait and sell it to a larger publisher when I have already established a market demand and can negotiate more favorable terms. Because I have assumed the risk of proving this book has a market, I will be in a much better negotation position down the line. (Though in this case, the main reason I am publishing it myself is because I don’t see how I can write about freedom from corporate America without total editorial control.)
Risk tolerance comes down to the individual. Because I am relatively stable in my financial situation, with established long term clients, I am able to tolerate a higher degree of risk and finance my own book ventures. Therefore, with my speculative creative assets, I can afford to hold out for a higher level of return.
Taking my own advice, why wouldn’t I just buy real estate with my extra money instead of financing my creative projects? Why sink money into a speculative asset when you can purchase a conventional one? It would make more sense for me to get involved in real estate. Real estate is one of the most lucrative investments in proportion to its risk, since the “asset” is secured by a property with a (usually) stable value.
I don’t get involved with real estate for one reason: my passion lies elsewhere. Beware of starting something on the side you are not truly passionate about. I do enjoy real estate investment and have done a fair amount of it, but I decided to pursue a dream in publishing. That’s the trickiest part of this whole “free from corporate America” thing: you have to strike a balance between the skills most in demand and the skills you most want to master.
And that brings us back to the “do what you love and the money will follow” approach. Is that what I am endorsing here? “Do what you love” only works if you are fortunate enough to have passions that line up with marketplace. Let’s take two examples: I know a lawyer who wanted to prosecute rapists and sex offenders even while in college. She’s been doing it for a decade, and for lack of a more appropriate word, she loves it. The money isn’t outstanding but it’s good enough. Her occupational passion lines up decently with the marketplace.
But what if you hate your job, as many do, and you live to garden? Fresh vegetables might improve your quality of life, but you can garden for decades without making money, unless you feel like running a vegetable stand. To turn a life in gardening into a profitable business, you’d have to refine your approach. You could write a book on gardening, or you could get into some type of organic food business, or even landscape design or floral arrangements.
There are some interests you just can’t squeeze a dollar from – try being a musician. Yes, you can tweak the model and make money by playing in a cover band or opening a recording studio or publishing a music newsletter (all true life examples Iâ€™ve seen), but the music biz is still a tough nut to crack, dominated by top-down interests.
If there was a huge market for thirtysomething rock stars, that’s probably what I’d be pursuing. But the joy I get from music is not from proximity to the industry but from playing original material. And there are a lot better musicians than me struggling to make ends meet. Fact: I would need vast resources to take the edge off near-impossible odds, so music falls rightly into the hobby category.
There’s a place in life for interests outside the marketplace. But if you’re up for it, most passions can be transformed into marketable pursuits if you are willing to play different roles than you might have originally envisioned (for example, selling songs to other artists as opposed to trying to make it in your own band). It’s all a matter of what falls within your business goals and, of course, if it crosses your own line in the sand about what youâ€™re willing to sell and what youâ€™re not. Some musicians have no problem playing Bar Mitzvahs, others would see that as a personal apocalypse.
So on our continuum of speculative-to-marketable assets, we should develop the most marketable assets that jive with our interests. Passion does matter: I know a lot of folks who run businesses they can’t stand. Sometimes I feel pretty sorry for them. On bad days, I’m one of them. But it’s equally foolish to work on self-indulgent projects in the naÃ¯ve hope that the market will someday smile on you because you love your work and therefore deserve to be successful.
Unless you have genius-level talent, you can’t get away with Albert Einstein “lost in the lab” tunnel vision. You need to master more than asset creation; you also need to know how to bring that asset to market and how similar assets are valuated. You have to know your industry and/or your neighborhood and/or your competition. I have a friend in New York who recently shot an animated short for submission to a comedy network. This project might seem like a long shot, except for the fact that he knows his industry inside and out. He has inside relationships, he has an agent, and he has studied the craft of script-writing and knows how to write for TV shows.
An animated short is certainly a speculative asset, but my buddy has lessened that risk through mastery of his craft and knowledge of his industry. He is also a stand-up comic, which has set up a valuable feedback loop that lets him know right away just how good his material is. Talent alone will not cut it; we all need some kind of feedback loop. We need to apply that talent through the so-called “best practices” in our line of work.
Sometimes that feedback loop brings tough news: we may have a passion for things we don’t excel at. I love to paint, but have never been much good. I can paint well only through over-the-top effort and lots of really crummy sketches in the trash bin. Writing, on the other hand, comes much more easiliy. But that’s just a starting point: I still have work at my craft, the editing process, and the publishing industry as a whole.
I know, for example, that it’s a lot easier to self-publish a successful non-fiction book than a novel. I’d like to publish a novel someday too, but I’ve decided to put that off since the market obstacles are bigger. And when I do go after fiction, I’ll probably pursue screenplays, as the market for screenplays is more clearly defined than the market for novels. I’ve learned this through my own homework.
Your interests are likely different, so your homework will be different. But as you consider the priorities I have set, it should give you a reference point as you find a balance between market trends and your own work preferences. And you do have to strike a balance.
I’m sure I could have chosen a more marketable non-fiction book than this one, perhaps a guide to abdominal exercise equipment. But I really believe in this project. So I chose non-fiction as a genre, but I didn’t choose the most marketable non-fiction topic of all time. On the other hand, I did set aside a more ridiculous philosophy project for this book, which I see as more broadly relevant. I found a way to write a book I could market that I also had a serious stake in.
In the end, pursuing the work you are most engaged with is the best idea, even if the odds are steeper. Why? Because in the world of virtual companies, we succeed when we are the best in the world at what we do. And you can’t become great at something without putting in the time and continously refining your skills. You do this by putting your most appealing business ideas into action and learning from the knocks. Even if you’re met with silence, that’s a heck of a message it its own way.
You may have to float a few projects before you see a “pushback” from the market. Once you see that first trickle of demand, you’ll know you’re headed in a good direction. With luck and effort, that trickle may become a revenue stream supported by an asset you own and control. You may or may not need a full time job at that point, but if you do, you will surely go to work feeling much better insulated against the whims of companies that hire and fire at will.
Want to buy Free From Corporate America or see reviews of the final published version from readers like yourself? The printed book is now available on Amazon.com with product reviews.
You can also get a discounted version of the final book in eBook (PDF) format, or you can pick up a copy on the Kindle. TheÂ published version of the book is significantly enhanced from the web version available on this site.