The Secret of Abundance: Or, Why Ideas Are More Valuable Than Money
A friend of mine bought a chain of about 30 pizza stores that were “under-performing.” They were in great locations: all near college campuses.
And they all had a great brand name, which you likely know: Domino’s.
My friend had been a high-up executive at Domino’s but now he wanted to branch out on his own, so he bought the 30 Domino’s stores and “turned them around.” He then sold them and became very wealthy.
I later asked him, “How hard could it be to turn around a Domino’s store?”
He said, “It’s very simple. Make round pizzas.”
Apparently the Domino’s that he took over were poorly managed, and the pizzas weren’t coming out consistently. They were odd-shaped, which was ruining the brand.
Additionally, they would claim the pizza would arrive in 30 minutes when in reality it would arrive in 45—also inconsistent with the brand.
An important part of the Domino’s brand is that it’s not a location restaurant. It’s a delivery service. If you are known as a quality delivery service, you better deliver when you say you will.
So because these locations were struggling, my friend was able to buy them cheap. He then determined why they were struggling, and fixed those two items: make round pizzas and deliver on time.
And then he became an enormous success. He didn’t need to discover the next Facebook to be a success. He just understood the basics of business and was able, fairly quickly, to make extremely simple adjustments, and because of that he made millions.
There are a lot of points to address here.
First off, I should mention that Ray Kroc was 59 years old when he bought the McDonald’s franchise. Just a few years earlier he had been working paycheck to paycheck to pay for the rent on his one-room apartment.
Was serving food Ray’s dream or passion? Of course not.
After he retired, at the age of 73, he bought the San Diego Padres. My guess is that was closer to his actual passion. Passions he had discovered within himself when he was just a little boy.
Sometimes it takes a while to get to do what we love, but it’s always worth it.
Second, it costs money to buy a franchise or buy McDonald’s or whatever. Or does it? Th e company that once owned the 30 Domino’s franchises mentioned above was going out of business. If a company has no or declining cash flow, debt, employees to pay, and is about to go out of business, then what is it worth? Well, it depends on the negotiation. This is a very important point about business.
Ideas are more valuable than money. The man with more ideas will be able to out-negotiate the man with fewer ideas.
The man with fewer ideas might say to himself: “I’m about to go out of business and I will be broke and I have no idea how to improve this business and here is a nice man willing to actually give me cold hard cash for this useless business.”
The man with ideas might be able to say: “Round pizzas = instant turnaround = huge cash flow of millions of dollars.”
Both are looking at the same thing.
People claim that they can value a business by looking at their profit statements. Nothing can be further from the truth. These traditional, or old school, businesspeople will soon find themselves out of business. This is the old way of looking at things.
The new rules require us to recognize that ideas as currency become critical when both sides of a negotiation are looking at the same thing. The person with more ideas doesn’t need to negotiate hard. There are no secret tricks. It’s just a matter of identifying what the value is in the other side’s eyes and meeting that value.
Remember: good negotiations are win-win. Both sides get what they want.
Let’s say that in the Domino’s case the selling location owners were so afraid it was worth zero that they were willing to take anything but they put up a confident front. Maybe they said $100,000 per store. My friend saw millions in potential per store so this might not have hurt him. But that’s a lot of money! $3 million!
Again, ideas are more valuable than money. Ideas are currency.
Money itself is meaningless. It’s just pieces of paper that our minds have assigned value to.
If you are 22 years old you might not be able to get the $3 million. You might not yet have enough friends, family, network, experience, to command the trust in your ideas they way an older person can.
Or you might. I don’t know.
But raising money is a matter of presenting ideas. How do you raise $3 million? In this case:
• You say who you are. My friend had been in the pizza business for a while, but as an employee and not an owner.
• You say why you can run these locations.
• You say how you are going to turn them around. (Round pizzas, consistent delivery times.)
• Most importantly, you be specific: Exactly how are you going to make round er pizzas and improve delivery times? This is just a matter of keeping an eye on the business and hiring the right employees. Many owners get bored of their businesses, or are not qualified to run them.
There’s an Argentinean saying that I always try to remember when thinking about business and management: “When the CEO is looking, the cow grows fatter.”
If you have ever been to Argentina, you know that the one true religion there is steak. They have their own way of making steak, different from that of any other place in the world, and it starts from the moment the cow is born and ends when the beef enters your mouth.
When the CEO is on top of things and is not lazy, the cow will grow into the perfect steak.
Smart CEOs know that this applies to all sorts of different businesses too.
Written By James Altucher
James Altucher has run a nine figure Venture Capital fund, a hedge fund, a fund of hedge funds, and is currently invested in over 30 private angel investments. Some of his bestselling books related to finance include "Trade Like a Hedge Fund" (voted book of the year by "The Stock Trader's Almanac"), "Trade Like Warren...