Chip Conley, founder of Joie de Vivre Hotels

Chip Conley is the founder of Joie de Vivre Hospitality, which he began at age 26 and built to more than 30 properties in California alone. In 2010, Joie de Vivre was awarded the #1 customer service award in the U.S. by Market Metrix (Upper Upscale hotel category).

Conley has also been named the “Most Innovative CEO” in the Bay Area by the San Francisco Business Times, and I’m proud to call him a friend.

We’ve shared many glasses of wine together. He doesn’t know what I’m about to tell you, but it’s true (Hi, Chip!). When we first met, and after reading his first book on Maslow’s hierarchy of needs, I wondered “Is this Chip dude for real? Implementing self-actualization in a company?!?” My curiosity drove me to visit a few of his hotels, including Hotel Vitale, where I eventually concluded: these are the happiest employees I’ve ever met.

He has figured out what makes people tick.

The following post is a guest post by Chip and based on his new book, Emotional Equations. Be sure to read to the end, as there is a chance to win an expense-paid trip to SF to spend an entire day training with him.

Deal-making? Empire building? Self-fulfillment? He’s your guy.

Enjoy…

Enter Chip Conley

I graduated from Stanford Business School at age 23 with Seth Godin.

I remember talking with him and others about my aspirations as an entrepreneur and my desire to become a CEO some day. Back then, I thought in order to become a successful CEO, I would need to become superhuman, leaping tall buildings in a single bound. But, after 24 years of being a CEO (I founded Joie de Vivre Hospitality, what’s become the 2nd largest boutique hotelier in the world, and sold a majority interest to a billionaire in 2010), I’ve come to realize that the best business leaders aren’t superhuman, they’re simply super humans as they’ve learned how to become Chief Emotions Officers.

Chief Emotional Officer?

Leaders are the “emotional thermostats” of the groups they lead. If you want to dig into the support for this, read this compelling piece by Daniel Goleman, the man who popularized the idea of “emotional intelligence” in the 90s and proved that 2/3 of the effectiveness of business leaders comes from their EQ rather than their IQ or level of work experience.

There are multiple metaphors I use to describe how emotions work in our lives. One that feels very familiar to me is baggage. Our luggage in life is an apt metaphor for me – a guy who’s been a hotelier for a quarter century. Countless times I’ve seen people show up at our hotel front desks with all kinds of baggage, and only some of it the physical kind. Most of us have emotional baggage that may seem invisible to the untrained eye or invisible to the person carrying the baggage. But the results of lugging that baggage around for years is noticeable in how that person shows up at the metaphorical front desk of life. If you are a Chief Emotions Officer, you are more aware of all the bags you’re carrying and how to open your luggage up and make sense of what’s inside.

Opening up a bag, you may find a truly messy interior with things in complete disarray. But, these emotional equations create a certain logic to how you pack and unpack your bags and, in fact, being a little more conscious of what’s in your bag may allow you to discard a few heavy items that have been weighing you down. Creating your own internal logic regarding your emotional baggage will allow you to carry a lighter bag…one that’s eminently easier to unpack.

4 Emotions to Unpack

We’re going to focus on four emotions that you can start unpacking (i.e. mastering).

Think of emotions as existing on a color wheel. Isaac Newton created the color wheel long ago and helped us understand that red plus blue equals purple, for instance. I learned in my research for Emotional Equations – which allowed me to spend a couple of years with some of the world’s psychology luminaries – that there’s an emotional wheel with primary and secondary emotions: the Plutchik wheel. In my book, I evolve this wheel further so you can imagine that Disappointment + a Sense of Responsibility = Regret. And, once you understand the emotional building blocks of Regret, you can turn it from a downer into a lesson. Regret teaches. Fear protects. Sadness releases. Joy uplifts. Empathy unites. Think of your emotions as messages that give you the freedom, rather than the obligation, to respond. One of my favorite quotes of all time comes from Viktor Frankl, author of Man’s Search for Meaning:

“Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.”

Now, let’s unpack and master the emotions of Despair, Happiness, Anxiety, and Curiosity.

DESPAIR = SUFFERING – MEANING

I am very proud of this equation.

It’s the one that started my exploration of emotions through the lens of equations. I took Viktor Frankl’s book and distilled it down to this useful mantra at a time in my life in 2008, when I had a series of friends commit suicide, had a flatline experience myself while giving a speech in St. Louis (literally: my heart stopped, and I dropped), and the rest of my life felt in disarray. If you consider the words “despair” and “meaning” to be abstract or off-putting, consider “sadness” as a tamer version of despair or “learning” as a more concrete version of meaning.

First off, in order for the math to work, “suffering” has to be a constant. This is the first Noble Truth of Buddhism, but it’s also true, and not just in a recession. You can always find the suffering if you want to look for it. I had no idea when I started writing this book that this decade would come to resemble the 1930s in that our near Depression-like economic conditions would persist as long as they have. But while the Depression was a very difficult time for so many people, interview-based research studies show that it indirectly prepared young women for losing their husbands later in life. These women learned self-reliance, independence, and courage early in life, which served them (and perhaps saved their families) when their husbands passed.

So, consider “meaning” in the following way: many of us go to the gym to exercise our physical muscles to ensure that our physical body doesn’t bloat or atrophy. If you’re going through a difficult time right now, maybe – unwittingly – you’ve signed up for emotional boot camp and you’re being asked to exercise emotional muscles that haven’t had this kind of workout for years. But, this isn’t meant to be just agony. It’s meant to prepare you for later in life. The emotions you may be mastering today – humility, resilience, persistence, a sense of humor – will serve you well at some later point in your life, maybe in the not too distant future.

For me, having my long-term relationship end in the midst of my train wreck of a life in 2009 was the last thing I was looking for. Suffering felt ever-present, like the fog during a San Francisco summer. The foghorn that cut through this opaque time was the question I asked myself on my most sad, self-pitying days, “How is this experience going to serve me in my next relationship? How is this going to make me a better partner when I find my true soul mate?”

These weren’t easy questions to ask when I felt radioactive and couldn’t imagine anyone loving me again. But I kept the exercise metaphor in mind. The fact that I could joke with friends about my emotional boot camp helped me realize that great rewards – or meaning – could arise as a result of this painful experience. So, just know that there are fruits to gather in the valley of Despair.

HAPPINESS = WANTING WHAT YOU HAVE / HAVING WHAT YOU WANT

People often have a love-hate relationship with this equation. The proper definitions of the numerator and denominator are what create the magic. “Wanting what you have” can be translated into “practicing gratitude,” having a reverence for what is working in your life. The more tricky definition is in the bottom of this equation. To “have what you want” is an act of “pursuing gratification.” I want something and it’s my job to go out and pursue it or “have” it in order to satisfy that want.

Don’t get me wrong. The act of pursuing something can bring us a sense of accomplishment and take us into that focused “flow” state. But, the risk is that “chasing something with hostility” (some dictionaries’ definition of “pursuit”) or even with just focused attention can completely distract you from what’s in the numerator, what you already have. Socrates said it best, “He who is not contented with what he has would not be contented with what he would like to have.”

As a type-A guy who’s spent more than my share of time on the hedonic treadmill, I can tell you that it’s very difficult to simultaneously practice gratitude while also pursuing gratification. Some mystics are able to take the bottom of this equation down to zero, which may give them infinite happiness. But, for the rest of us mere mortals, the risk is not in lack of pursuit, as this is part of what modern society demands of us. The risk is that we completely diminish the power of gratitude.

So, the true power of this equation is in keeping your attention on the numerator.

Someone once said to me that feeling gratitude without sharing it with someone is like wrapping a present without giving it to the intended recipient. So, what are the ways you can show your gratitude in such a fashion that it becomes a habit or practice for you that’s ingrained in your everyday life? For me, I needed to start by having it on my conscious “to-do” list each day. I had a rule that I had to give two face-to-face expressions of gratitude each day at work, preferably to someone who found the thank you unexpected. In fact, I wrote about this in the Huffington Post after one of my recent trips to Bali. What if you thought of your expressions of gratitude like a devotional daily offering?

Let me give you a suggestion about a Gratitude Journal as well. They’re not for everyone, just like personal journals resonate with some while repelling others. The purpose of a Gratitude Journal is to help you be conscious about “wanting what you have.” An alternative means of accomplishing this purpose is to have a Gratitude Buddy. Make it a point to meet with your Buddy once a month (or more frequently if you wish) in a location where there are no distractions and ask each other, “What gifts do you have in your life that are easy to take for granted?” and “What was a recent gift that may have been wrapped up as a pain or punishment?”

For those of you who’d like to explore this equation a little further, I have two suggestions.

1. Check out a research article by Jeff T. Larsen and Amie R. McKibban where they literally put this equation to the test (with inconclusive results, but really interesting findings).

2. Watch my 2010 TED talk, in which I share my key learning from my trip to Bhutan to study their Gross National Happiness Index.

ANXIETY = UNCERTAINTY x POWERLESSNESS

After reading more than a dozen books and 50 research studies on anxiety, I was struck by the fact that 95% of the causes of anxiety seemed to be distilled down to what we don’t know and what we can’t control. You may have heard of the study that demonstrated most people would prefer receiving an electric shock now that’s twice as painful as receiving some random shock in the next 24 hours. This is why, as leaders, we need to recognize that hiding the truth, especially when it’s going to come out at some point in the near future, is a futile mistake that can often just increase the amount of anxiety your employees are feeling.

If we know that the combustible product of uncertainty and powerlessness creates anxiety, we can create what I call an Anxiety Balance Sheet to turn this around. Take out a piece of paper and create four columns. Then, think of something that is currently making you anxious. Regarding that subject, the first column is “What Do I Know” about this issue. The second column is “What Don’t I Know.” The third column is “What Can I Influence.” The fourth column is “What Can’t I Influence.” Spend enough time doing this so that you have at least one item per column but you may find that you have a half-dozen items in some columns.

After you feel complete, what do you notice with respect to the four columns? About 80% of the people I’ve worked this through with are surprised that they have more items listed in columns one and three (the “good” columns) than they do in columns two and four. The reality is that when something is making us anxious, we tend to fixate on those elements of the problem that feel mysterious (what we don’t know) or uncontrollable (what we can’t influence). So, there’s some liberation in just outlining what’s making you crazy and realizing that there may be many balancing positives to those issues that are vexing you.

Now, spend some time reviewing the items in column two (what you don’t know). Is there someone you can ask – your boss, your boyfriend, your doctor – who can help you with some needed information that will move this item from column two to column one? Maybe it’s just doing a Google search? I know it’s scary to ask your boss whether your job is in jeopardy, but remember the electric shock example I mentioned earlier. Anxiety can be more painful and debilitating than bad news. Now look at column four and truly ask yourself, “Are you completely powerless about the items on this list?” I’ve found that having a smart friend sit with me can sometimes help me uncover ways to move items from column four to column three.

In sum, just the act of unpacking your anxiety bag and knowing what’s inside can have a profound effect on reducing your fear of the future.

CURIOSITY = WONDER + AWE

We’ve had a subtraction, a division, and a multiplication equation so far. Now, we’ll finish with an addition equation around the experience of curiosity. Recent studies have shown that curiosity is one of the most valuable emotional qualities people can leverage during periods of crisis. Fear and most negative emotions train us to narrow our scope. “Fight or flight” reactions are evolution’s means of helping us avert danger. But, oftentimes, we need to move from narrowing our attention to the “broaden and build” way of thinking that Barbara Fredrickson talks about in her book on Positivity. Getting through your own emotional recession may require bigger thinking rather than narrow execution.

When you’re living in a place of fear, it is hard to be curious. But, I’ve found that so much of it comes back to defusing my natural tendency toward reactivity. In other words, it’s learning to pause. Curiosity is not a reactive emotion. It’s one that takes a certain amount of reflection and a willingness to admit what you don’t know. So, ask yourself, “What habitats allow me to be more curious?” I first had to make a list of which habitats made be less curious: the office, any conference room, investor meetings, and spending time with people who I wanted to impress.

So, I knew that these were not places that were going to help me stoke up bigger thinking. Ironically, when I made my list of curious habitats, I found my list to be longer than I expected: anywhere in nature but especially near a beach with crashing surf; hanging out with kids; museums or other experimental spaces with art; zoos; places with a big night sky and lots of stars; my backyard cottage; and any place where I felt comfortable laughing from my gut (it’s hard to be full of humor and full of fear at the same time).

As I’ve gotten older, I’ve found that seeking the sacred in life opens up my sense of awe and my ability to connect with curiosity.

I’ve recently made a decision to seek out a sacred festival somewhere in the world each quarter as a means of committing to finding habitats for curiosity. As Tim F. knows (he was a fellow citizen of my camp Maslowtopia), I’ve been an aficionado of Burning Man for many years and some of my best business ideas have come out of my time in the desert marveling at transcendent art and having non-linear conversations.

So, if you’re feeling “on empty” creatively, know that curiosity is the fuel you need to seek. In author Liz Gilbert’s 2009 TED talk (TED is another habitat for curiosity), she shares the fact that the genesis of the word “genius” comes from “genie” and that the most creative people in the world are able to become vessels for the genie to inhabit them. My experience is that these genies prefer inhabiting curious places in the world and that’s where they’re most likely to tap you on your shoulder and give you the gift of inspiration that may change your life.

In sum, the more the external world becomes chaotic, the more we rely upon internal logic. This was true in the 1930s when Nazism and political and religious fundamentalism rose. But, that decade also sprouted new thinking from people like Norman Vincent Peale, Dale Carnegie, Napoleon Hill, Viktor Frankl, and Reinhold Niebuhr (who created the Serenity Prayer).

I hope that you find these emotional equations help you to think differently, live better, and truly become the Chief Emotions Officer of your own life. It’s worth the introspection.

—

TIM:

Chip is offering an exclusive to readers of this blog: the chance to spend a full day with him in San Francisco.

He’ll cover economy airfare from anywhere in the US (if you’re international, you’ll need to get yourself to the US), and he’ll also cover two nights at Hotel Vitale on the water, or the best alternative if they’re sold out. The usual legal stuff applies: must be older than 18, void where prohibited, no purchase required to enter, etc.

No later than this Friday (1/20/12) at 5pm PST, leave a comment below and answer the following, in order, and in no more than 300 words:
1. What is your favorite inspirational or philosophical quote?
2. How could you apply one of the equations in this post to your life for maximum benefit?
3. What would you like to change or build after a day with Chip in SF?

Only the first 100 entrants are eligible, so the earlier the better!

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Odds and Ends: The Crunchies, Winners, and More

The Crunchies, something like the tech Oscars, are currently in the finals, and quite a few of my start-ups have made the cut (I’m honored to be involved with all of them). If you like these products or people, please click through to give them a vote! All of the candidates, many of them friends, are outstanding.

CEO of the Year – Phil Libin (Evernote) and Dick Costolo (Twitter)
Angel of the Year – these folks are all incredible, but I have to vote for my man, Kevin Rose.
Founder of the Year – Leah Busque (TaskRabbit) For the story of how Leah and I met, as well as how she got me to be an advisor, see this article: “How to Turn $750 into $1,000,000″

Best Tablet App – StumbleUpon
Best Mobile App – Evernote and Taskrabbit
Best Location App – Uber (check out the San Francisco grid)

For all of the categories and finalists, go here.

Article 126: No brown M&M’s! (Photo: Mr. T in DC)

Happy New Year, all! I’ll be putting up a “Lessons learned in 2011″ post soon. In the meantime, here is a taste of things to come.

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I can come across as anal retentive, even severely Monk-ish. One reason for the madness: with rare exceptions, I’ve come to believe that how we do anything is how we do everything.

I’m not alone.

The following is a short excerpt from The Checklist Manifesto by Atul Gawande, also reprinted by Tehelka magazine in India. In it, we learn the logic of David Lee Roth’s famous obsession with brown M&M’s:

Listening to the radio, I heard the story behind rocker David Lee Roth’s notorious insistence that Van Halen’s contracts with concert promoters contain a clause specifying that a bowl of M&M’s has to be provided backstage, but with every single brown candy removed, upon pain of forfeiture of the show, with full compensation to the band. And at least once, Van Halen followed through, peremptorily cancelling a show in Colorado when Roth found some brown M&M’s in his dressing room. This turned out to be, however, not another example of the insane demands of power-mad celebrities but an ingenious ruse.

As Roth explained in his memoir, Crazy from the Heat, “Van Halen was the first band to take huge productions into tertiary, thirdlevel markets.

We’d pull up with nine 18-wheeler trucks, full of gear, where the standard was three trucks, max. And there were many, many technical errors — whether it was the girders couldn’t support the weight, or the flooring would sink in, or the doors weren’t big enough to move thegear through. The contract rider read like a version of the Chinese Yellow Pages because there was so much equipment, and so many human beings to make it function.” So just as a little test, buried somewhere in the middle of the rider, would be article 126, the no-brown-M&M’s clause. “When I would walk backstage, if I saw a brown M&M in that bowl,” he wrote, “well, we’d line-check the entire production. Guaranteed you’re going to arrive at a technical error… Guaranteed you’d run into a problem.” These weren’t trifles, the radio story pointed out. The mistakes could be lifethreatening. In Colorado, the band found the local promoters had failed to read the weight requirements and the staging would have fallen through the arena

Do you have any similar tests that you’ve found helpful in business, hiring, life, or love?

Kevin Rose and I go deep on a few subjects in this longer-format episode of “Foundation,” on which he’s interviewed many of my favorite entrepreneurs and investors, including Jack Dorsey (Twitter, Square) and Chris Sacca (Lowercase Capital), among others.

I had a great time, as should be clear from the wine and laughter. It’s quite different from The Random Show and more of a Larry King-like format… but with more cursing.

Hope you enjoy!

Happy holidays and Merry Christmas, everyone!

Six-pack abs sell. (Photo: San Diego Shooter)

Once or twice in the past, I have referred to “someone” who has earned $5,000,000-$10,000,000 per year with e-books and cross promotion.

For that, I should apologize, as it’s not accurate: his numbers are now closer to $1,000,000 per month, and “e-book” doesn’t begin to explain what he does. That someone is named Mike Geary. He prefers to keep a low profile, skiing powder and refining his “muse,” or automated business, to a precise science. From strategic customer service in Germany, to testing for trending, it’s all piece of a well-planned puzzle and well-oiled machine.

For the first time, this post will explain how he built his business, some of the key lessons learned, and common mistakes with digital products.

As you read, keep in mind two things:

- He is, without a doubt, considered one of the smartest online marketers and traffic buyers (a key differentiator) in the world.
- He started off knowing nothing and got there through intelligent testing.

As Thomas J. Watson, founder of IBM, is famous for saying: “Nothing happens until someone sells something.” Planning is valuable, but–long-term–it’s your ability to improvise and adjust that makes the difference.

Enjoy…

Enter Mike Geary

Can you describe your muse?

My “muse” (i.e. business) is composed of three main components:

1. I sell a fitness information product called “The Truth about Six-Pack Abs,” which has sold more than 500,000 copies since 2005.
2. I publish a fitness and health newsletter to about 680,000 subscribers (with subscribers in almost every country), and have built a large content based website that goes along with this fitness newsletter.
3. I act as a media buyer, purchasing large amounts of traffic (mostly in the fitness/nutrition niche) that I funnel to a few select partners. This allows me to become integrated into several other large fitness and nutrition businesses (they promote my product extensively on their backend) since I act as a very large source of their overall traffic.

What is the website for your muse?

My main website, which has the sales process for my “Truth About Six Pack Abs” product, is: www.TruthAboutAbs.com

[Click here to see an affiliate landing page, click here to see the standard non-affiliate/PPC landing page]

How much revenue is your muse currently generating per month (on average)?

The business as a whole (all three components listed above) generates just shy of $1 million in revenue per month. Total revenue for last year was approximately $11 million.

While the financial freedom that this business has created has been amazing, it’s also been very rewarding to receive thousands of emails in our support center from customers who have literally changed their lives with the help of my fitness advice. I still get chills when I read a glowing email from a customer that has lost 100 lbs with my program, totally changed their confidence and energy, and just overall changed their life! So cool.

To get to this monthly revenue number, how long did it take after the idea struck?

To be honest, I was a little slow in learning marketing and building the business, so it took me about five years to get to those numbers. About two years into this venture, I was finally making about $50,000 per year with the online business. As I explained above, growth exploded once I quit my corporate job, and my earnings increased about 10x the following year. Growth in following years went to $3.6 million, then $6 million, and finally $11 million in annual revenue.

How did you decide on “Truth About Abs”?

It was simple really… A mentor told me to follow what I’m most passionate about, and that passion was fitness and nutrition. I can talk all day long about fitness and nutrition, so why not do what I love?

I initially bought an information product that was about $300 (a big investment for me at the time) from a marketer named Ryan Lee. The product was all about teaching fitness professionals how to build a more successful business, particularly online. To this day, I still give Ryan credit for being the guy that got me into this career and changed my life. Thanks, Ryan! [Ed: The product Mike is referring to is no longer available. For those interested, this course covers similar content.]

As I studied Ryan’s course, I thought about my ideas for a potential information product. Working as a personal trainer, I knew that about 90% of the questions I got from clients were always about “six pack abs” or getting a flatter stomach. I also knew that there was a load of crap out there on the internet and on TV infomercials for all sorts of garbage like ab machines, belts, and worthless pills. Finally, I’d seen a ton of bad exercise advice floating around online. That was where my initial idea for “The Truth about Six-Pack Abs” came from. Little did I know that the idea would eventually become such a phenomenal success!

What ideas did you consider but reject, and why?

As crazy as it sounds, “The Truth about Six Pack Abs” was my very first idea, and it’s been the product I’ve continued to focus on throughout the years. I haven’t strayed into other businesses or distracted myself from the product that I knew would be a best-seller. I wanted to keep my focus on one main product. With that said, I do have a couple other products that sell okay, such as my skiing fitness product (AvalancheSkiTraining.com), which I produced solely because it was a labor of love. But to this day, the “Truth about Abs” product remains my bread and butter.

How did you get started? What ultimately lead you to your current lifestyle?

I started my internet business in 2004 because I had become fed up with the time and freedom constraints that came with my old 9-5 corporate lifestyle. My main goals in designing my “new life” were:

1. To build more time freedom into my life. I desperately wanted to design my new life with much more free time to enjoy my hobbies, friends, and family. This “time freedom” was actually a higher priority for me than the financial rewards of starting a web-based business. And this may sound funny, but I also had a goal to eventually NEVER have to wake up to an alarm again (aside from traveling). I despise waking up to an alarm!
2. The ability to travel as much as I wanted, to anywhere in the world, with no financial or time constraints.
3. More financial security for myself and my family.

When I set these goals back in 2004, I was basically working three jobs. I worked an engineering consulting job from 9-5 at an office. I also worked 15-20 extra hours per week as a personal trainer at a local gym, and I was attempting to build my online fitness business.

From 2004 to 2006, I made consistent but SLOW progress on my internet business. By the end of 2006, the internet business was making just as much money as my corporate job. I quit my corporate job in January 2007, and never looked back. Quitting my job at that critical point in time was the best decision I could have made as that freed up the time I needed to dedicate solely to my internet business, which started to boom in the months that followed.

Within another year, my internet business grew into a 7-figure annual business and, eventually, an 8-figure annual business in revenue.

It may have taken a few years to achieve, but I eventually successfully reached all three of those goals… time freedom, ability to travel anywhere/anytime, and financial freedom. Oh, and — except for when making flights — I haven’t had to wake up to an alarm clock in over four years now!

What does your daily/weekly routine look like? Where do you live and what does your lifestyle look like?

It has really been a dream come true. After I quit my corporate job in 2007, I moved to the mountains of Colorado and skied almost every day that next winter. I don’t ski every day anymore in the winter (I’m more picky about the ski conditions now), but I never ever miss a powder day. For those who aren’t hard core skiers: a powder day is like the holy grail of skiing. If you love skiing, you never want to miss a powder day!

In the summer, I do a lot of hiking, mountain biking, and other outdoor fun. And because of my time freedom, friends and family can come out to visit me anytime in Colorado, so I love to host friends and act as a tour guide.

As for traveling, my girlfriend and I now travel at least 10-15 days every month. We’ve traveled to dozens of countries and done all sorts of fun stuff, like heli-skiing in Chile, ATVing and ziplining in Costa Rica, dry suit scuba diving in the Silfra Ravine in Iceland, and tropical scuba diving throughout the Carribean. We’ve also traveled extensively throughout Mexico, Central America, South America, and lots of islands! We plan to do more traveling through Europe and Asia soon.

When I travel, I still work on my business about 1-2 hours per day. That’s what I’ve decided personally is a good schedule to allow me to enjoy traveling and still keep up with my business. When I’m not traveling, I basically allow myself complete freedom of schedule. Some days I’ll feel like I’m “in the zone” and just work all day long, maybe 10-12 hours or more. Other days, I might only work two hours and enjoy the rest of the time doing fun outdoorsy stuff, going to a nice dinner, or golfing with friends.

What were some of the main tipping points or”A-ha!” moments? How did they come about?

In the very beginning, I had this foolish idea in my head that this flood of people would automatically rush to my website, buy my product, and I’d be a millionaire within months. Reality struck when I had a whopping 5 visitors to my site in the first month. At the time, I didn’t understand that you actually have to DRIVE traffic to your site, as people won’t just magically find you.

After about six weeks of having my site “live” and still having yet to make a single sale, I started to get discouraged and thought that this whole internet marketing thing just didn’t work. Then I had a tipping point: I got my first sale! But when I looked at the details of the sale, I noticed that the buyer was one of my mom’s good friends. I had to laugh, but at the same time, it gave me the motivation to push forward, as I saw that the website could make sales if I just produced traffic.

The next tipping point came about 18 months later when I started playing with Google Adwords, and learning how to purposely drive traffic instead of just hoping people would find the site. I’m very technically minded, and Adwords is a numbers game, so that fascinated me. Within a couple months, I started learning how to split test ads, find what converted best for my site, and get massive amounts of traffic for reasonable prices (at least reasonable enough to break even, or make a small profit on the front end). Running a massive amount of traffic on Adwords and doing lots of testing taught me how to buy traffic in other places too, beyond Google’s network.

Another big tipping point came in early 2007, when I finally put my product on the affiliate network, Clickbank. The biggest thing that I did was set my affiliate program apart from the crowd. Here’s how…

At the time, I noticed that most vendors on the Clickbank marketplace were only paying affiliates 35-50% commissions. Even the highest paying vendors were paying 55% to 60% commissions max. To some, that might seem very generous. But at the same time, we’re selling digital products, so we don’t have as many overhead costs as with a physical product and can be more generous.

I decided to be OVERLY generous with affiliates and truly set myself apart from the crowd. Instead of the normal 35-60% commissions, I set my commissions at 75% (which is the maximum percentage you can pay to affiliates in Clickbank). Immediately, this made my product more lucrative for most affiliates than other products that were paying lower commissions. I had hundreds of affiliates shift their traffic to my site instead of some of my competitors. Within a couple months, I jumped up to one of the best selling products on the entire Clickbank marketplace, out of more than 10,000 products.

[Tim postscript: As Mike mentions in the comments, this means:

"For a clarification on revenue, the way that Clickbank works is to take the processing fee and the affiliate fee out before the revenue ever flows into my account, so that $11MM 'per year' actually did not include gross sales numbers. With gross sales, it would be more around $20MM-$25MM per year, I’m guessing."]

Within 6-12 months, most other top selling Clickbank vendors followed suit and switched to 75% payouts. Currently, as a vendor (product creator), if you pay affiliates any less than 75% (as that’s now the standard), it’s very hard to be competitive, because most affiliates will only promote products that pay 75% commissions.

Some vendors still have the wrong mindset and can’t stand the idea of the affiliate making more per sale than they make as the creator of their own product. That’s foolish, however, because the math is simple: would you rather get 10 sales and make $30 per sale ($300), or get 1,000 sales at $10 per sale ($10,000)? Better yet, how about 500,000 sales at only $2 per sale in profit ($1,000,000)? The answer should be obvious. The more generous you can be with affiliates and other business partners, the more sales VOLUME they can send you, especially if they’re buying traffic and incurring that cost. Plus, there’s more backend revenue potential with a higher volume of customers.

The above was a huge takeaway for me, and it led to the development of two priorities that are still at the heart of my business today:

1. Treat my customers like gold. Without happy customers, any business will eventually die. I wanted people to get RESULTS! I don’t just want to sell them some fad or gimmick that doesn’t work.
2. Treat my affiliates (and other business partners) like gold. Going above and beyond while being overly generous with business partners and affiliates effectively jumpstarted my business success. In fact, in additon to being one of the first vendors to pay affiliates 75% commissions, I was also one of the first vendors on the Clickbank marketplace that started to reward affiliates that sent over a certain number of sales each month with bonuses up to 85% or even 90% commissions. The additional percentage points had to be paid manually at the end of the month as a bonus.

What resources or tools did you find most helpful when you were getting started?

I remember buying lots of low priced marketing e-books about search engine optimization (SEO) and pay-per-click (PPC marketing). Those e-books that I bought 5-6 years ago are mostly outdated now, given the techniques change so rapidly. Regardless, the benefit was that I learned how to use both SEO and PPC and stumbled onto new discoveries as I worked with both.

What were your biggest mistakes, or biggest wastes of time/money?

A couple that I can think of right off the top of my head…

I got approached once to buy an “email drop” in a list that supposedly had 5 million names. The list was apparently built through credit card surveys or something like that. I think it only cost $600 to run an ad to this list, so I thought it HAD to be a winner, and I tested it. I ended up getting 1 sale ($40) from that $600 test. Even with a list of 5 million names, that list was basically worthless since there was no relationship, and it had been built solely from credit card surveys. Compare that to a JV (joint venture) partner who has a great relationship with their list. We’ve had some affiliates get hundreds of sales from relatively small lists of maybe 10,000 emails.

I know that buying “email drops” can sometimes work (and I’ve made other successful ad buys in newsletters), but you have to know exactly how the list was built, if it’s maintained regularly, and if it has a loyal following. Otherwise, it could be a garbage list.

Another failed test was a direct mail postcard we tested. The whole campaign cost me about $30,000 to implement (postage costs, postcard creation costs, copywriting, list rental, etc). It seemed like a viable test as I had friends that had moderate success with direct mail pieces before. The postcard tried to get the user to go to a website from the postcard and purchase our fitness product. It backfired big time, as we only made back about $3,000 out of the $30,000 investment in the test. A 90% loss to the tune of $27k… No fun.

Now, I’m not saying that a postcard-to-website sales process can’t work. However, in our example, we obviously had a big missing link to the puzzle and it just didn’t produce sales. I think it’s a trickier process than someone who’s  coming to your site after clicking on a PPC ad or banner ad.

What have been your key marketing and/or manufacturing lessons learned?

I haven’t manufactured any products, so I can’t comment on that. As for marketing, my biggest lessons (as mentioned above) were being overly generous with affiliates and paying them every possible penny that I could. This is the only way to be competitive with affiliates: to be the business with the biggest payout to them. Even if you have to pay affiliates 100% of your front end revenue, at least you know that you obtained those customers without incurring a loss (which doesn’t happen with every type of advertising), and now you have the opportunity to build a long term relationship with those customers and sell them your other products in the future.

Another key marketing lesson I learned is that when buying traffic, be prepared to not make any profit on the front end. Sometimes, in order to compete with other advertisers, you need to be willing to take a small loss on your advertising spend in order to bring in lots of customers. You just need to be careful to know your backend numbers (average future revenue amount per customer) well enough to ensure that your front-end losses aren’t so steep that you can’t make back the advertising loss after a certain period of time.

Any key PR wins? Media, well-known users, or company partnerships, etc.? How did they happen?

I’ve had various radio interviews, and had content picked up by popular websites, blogs, etc. However, some of my best relationships have been companies that I’ve partnered with on media buying (think AOL, MSN, etc.) Spending a boatload of money with certain big companies, and building a long term relationship with them by advertising for years has resulted in special deals for cheaper traffic. If you think about it from the publisher’s perspective, it helps to save them administrative costs by dealing with fewer advertisers, so sometimes I’ve been able to get better deals by agreeing to large contracts upfront. Another advertiser might only buy 1-2 ads, instead of the 50 ad placements that I would buy.

Where did you register your domain (URL)?

GoDaddy.com

Where did you decide to host your domain?

I host with a company called Rackco. It was just a referral from a friend at the time, but I’ve stuck with them for years.

If you used a web designer, where did you find them?

The only thing I had “designed” was my cartoon based header graphics. Again, this was simply a referral from a friend, and the guy I used was a talented cartoon designer named Vince Palko. I’ve also heard that 99designs is a great place to get designs.

Do you have any employees?

I have customer service representatives in a few different countries and major markets. Specifically, I have one person in France, one Swiss for German translation help, an English-language affiliate support rep in Trinidad (he also handles Spanish translation), and one German-based woman who handles German affiliates. Finally, I have a webmaster who helps with site maintenance.

If you were to do it all over again, what would you do differently?

Nothing. I’ve learned so much, even from my mistakes, and everything has happened for a reason.

What are some common mistakes when buying media/traffic?

The most common mistake is not letting enough traffic flow to see true trends. Some people shut down their campaigns after only a couple hundred clicks thinking that it won’t be profitable, but they haven’t let it run long enough to see for sure. For example, a newbie might shut down their campaign after only 500 clicks and 1 sale. But what if they would have made 3 sales in the next 500 clicks, for a total of 4 sales in 1,000 clicks? Data can be pretty variable when you’re still under 1,000 clicks. I generally test an ad for at least a couple thousand clicks. However, keep in mind that I deal mostly with the fitness and nutrition niches and they require high volumes of clicks to see true data.

Another big mistake is not split testing enough variations of ads. Many advertisers give up on losing campaigns after testing only a couple ad creatives. However, I’ve found that simple modifications — such as a one word variation in a headline or a slightly different image or background color — can be the difference between a losing campaign and a profitable campaign. In some instances, I’ve used the exact same ad text combined with slightly different pictures and seen DOUBLE the click-through rate (CTR).

The last mistake is also very common: most advertisers aren’t willing to lose money to find what works. I EXPECT to lose money the first time I test a campaign. Then I tweak the ad copy, offer, etc. based on our testing results, and we see if we can restart the campaign a second time and make it profitable based on what we learned [i.e. what lost the least money, etc.] For example, if I do a $10,000 traffic buy test on a new website that we haven’t worked with before, we’ll usually only make back maybe $6,000 to $7,000 for a net loss of about $3,000. But we also usually learn that one of our ad variations performed MUCH better than the others, and we can work with that specific ad from that point forward and possibly negotiate lower rates. Sometimes we find that the numbers are too far off to work in the future, so we just decide to cut all ties with that particular website and not buy traffic from them again if they can’t offer lower rates.

Any tips for Facebook media buying? Common wastes of money or newbie screwups?

The three mistakes that I listed in the previous question apply to buying Facebook traffic, as well. I’ve found that the most important aspect of Facebook ads is the image, so it’s necessary to test at least 6-10 variations of images for each ad. The image attracts the eyeballs first, then your headline needs to finish the job and get the person to click your ad. One thing I’ve found is that images that have done well for ads on other sites may not always be effective on Facebook. Each site is unique with its style, colors, and layout, and I’ve been surprised by some images that work well on Facebook and others that don’t.

One common mistake I’ve seen with people buying ads on Facebook is paying WAY too much per click. In my experience, you almost NEVER need to pay the recommended bid amount that Facebook displays when you set up your ad. For example, I’ve set up ads where the recommended bid amount was $1.12 per click. I’d bid $0.30 cents instead, and would still be able to get large amounts of traffic (assuming that I was able to get a high enough click through rate on the ad). In order to pay a lot less than the recommended bid price per click, you need to get an above average click through rate, so it takes good ad copy, good images, and the right targeting.

If you had $5K to start media buying, what would you do right now, assuming all sites/platforms (e.g. AdWords) were available to you?

The best quality and cheapest traffic is available on Google’s content network. That’s easier said than done, as Google is currently very picky about what offers they will allow to run. In certain industries, it’s not even worth trying anymore, because Google won’t allow some types of websites to advertise at all. But if you are advertising in an industry that Google still accepts, the content network is wide open, and it’s the cheapest source of quality traffic available in most cases. It’s also one of the highest volume traffic sources available (along with Facebook), but in some industries, the Google content network can be easier to advertise profitably compared to Facebook.

Sometimes you’ll hear marketing “gurus” say that the search network is better quality traffic than the content network. This is false, as it’s industry specific. In my case, I spent over $5 million advertising on Google over the years with fitness and nutrition products, and I can say without a doubt that content network traffic is MUCH cheaper than search traffic, and converts even higher than search traffic in many cases.

What would you do if you had $20K to start media buying?

At this spend level, you can do test campaigns on nearly any major website, as most major sites require test campaigns of around $5k to $10k minimum to get started. We’re talking about big news websites, politics sites, weather sites, and major sites like Yahoo, MSN, and AOL. From my experience with media buying, testing is all that matters as it’s hard to compare CPM rates from one site to another, since placement locations, sizes, etc. are all different. For instance, I’ve had CPM campaigns that were profitable on some sites at super high rates of $6.00 CPM or more, and on other sites, a price as low as $0.50 CPM resulted in a loss. You never know how an individual site will perform until you test.

The usual steps for a media buy on a large site are:

1. Run $5-10k test campaign (most times, initial test loses money). Smaller sites accept much lower test amounts.
2. Optimize the ads that performed best and delete the ads that performed worst.
3. Negotiate a lower CPM rate if the publisher can go any lower (sometimes they can, and sometimes they can’t go lower — depends what other advertisers are paying on average and how much inventory they have available).
4. Re-launch campaign when you’re confident that you will be able to profit.

What are your recommendations for developing information products?

Sell the customers what they want, but give them what they NEED. In my market, what people want are six-pack abs exercises. But that’s not what I give them, because that’s not what they need. They need the right nutrition, the right full body training program, and the right mindset to be dedicated to their goal. Basically, I sell six pack abs, but I teach them how to live healthier and adopt a fitness lifestyle in order to lower their body fat for life.

What have you learned about price points?

It’s been really interesting to see some of the testing for pricing. We’ve tested price points for various fitness info products at $29.95, $39.95, $47.00, $67.00, $77.00, $79.00, and $97.00. I’ve found a sweet spot in the $47.00 price point for most online fitness info products that seems to maximize front end revenue and the total number of customers. Lower price points can sometimes bring in more customers on the front end, but the backend marketing plan needs to be solid in order to make up for the lower price (especially if you’re buying traffic and need that front-end revenue to come close to break even on your ad buys).

How have you tried to minimize requests for refunds?

Truthfully, I’ve just focused on producing a great quality product, which goes a long way to reduce refunds. I know that some people are dishonest and will request refunds even though they liked the product. But I feel that, overall, most people are honest and won’t take advantage of someone on purpose.

A surprisingly common scenario for requesting a refund is when people don’t understand that the program is downloadable, even though it’s spelled out on the site. They think they’re getting something in the mail, then request a refund when they don’t. It’s best to be as clear as possible to make sure people understand that this is a downloadable program. This can prevent loads of customer service requests from confused customers. Of course, if you sell a physical product, this isn’t a problem, though shipping and delivery time may be more of an issue.

How do you test for your content pages?

At this point, it’s fairly easy to test the interest in content pages. I simply come up with an idea, prepare the article, and send it to my email list of about 680,000 readers. The open rates of the email give a good representation of how interesting that topic (email subject line) was to most people.

Also, on each content page, I have the social media sharing buttons (Facebook, Twitter, and Stumbleupon). I can guage how much people like a particular topic based on how much social media sharing occurs. I have some pages with over 40,000 Facebook likes and others with only a couple dozen likes.

Best and worst performers? Most unexpected winners or losers?

My best content pages are typically topics that surprise or shock people in some way, or clear up a confusing topic. Take note of the amount of Facebook likes, tweets, etc. on some of these pages below:

Successful example #1: “Are Whole Eggs or Egg Whites Better for You?”

In this article, I surprise people with my arguments as to why egg yolks are actually the healthiest part of the egg, and anybody eating only egg whites is making a foolish decision. This is a great example of the type of information that goes against the grain and shows how people have been misinformed by the media.

Successful example #2: “The Salad Dressing You Should NEVER Eat.”

This is another good example of a content page that shocks people. Before reading this article, a lot of people had no idea that most salad dressings at the grocery store are a health disaster, full of additives like corn syrup, unhealthy soybean and canola oils, etc. People want to share articles like this.

Successful example #3: “Does Canned Food and Bottled Water Increase Your Abdominal Fat Through Hidden Chemicals?”

This is another article that shocks most people, as it teaches them about a rather unknown chemical that they might be exposed to in canned foods and plastics. These types of surprising articles help people to want to share the article with their friends to help protect their health.

And now for an example of a content page that didn’t seem to work that well:

“The Nutrition Benefits of Kale.”

You can see this page got less than 100 Facebook likes, compared to the examples above that have thousands, or even tens of thousands of “likes.” What’s the difference? Well, I think the main difference is that kale is just not a “sexy” topic. People already know that kale is good for you, so there’s nothing shocking in this article. Compare that to the egg yolks article, where most people think egg yolks are horrible for you, and I give an argument to show why that’s wrong. It’s more shocking and therefore something people want to share with friends.

Most common mistakes and/or easy fixes for content pages?

Assuming the content is interesting and well-written, one mistake I see is that people don’t always make it easy for people to share things on their website. For example, they might just have a Facebook like button at the top of the page, but not the bottom. I like to have sharing buttons at the top and the bottom so that people see the buttons right as they finish the article. I think it’s important to have the social media buttons at the top of the page too so that people see that the page has social proof and is popular right at the beginning.

I also think some site owners can use too many sharing buttons, even more than a dozen total. I like to use the “Big 3″ (Facebook, Twitter, and Stumbleupon) to keep things uncluttered.

What’s next for you?

Honestly, I just want to continue simplifying my business more and more as time goes on.

I have plans for a couple new small projects, one of which is an upcoming healthy fat-burning recipe book that I’m working on with a co-author. Other than that, one of my main goals is to maintain my current lifestyle without getting bogged down by too many business projects. I want to continue pumping out great fitness and nutrition content that helps my readers live healthier lives.

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Related and Suggested Posts:
Engineering the “Muse”: Case Studies, Volume 1
Engineering the “Muse”: Case Studies, Volume 2
Engineering the “Muse”: Case Studies, Volume 3
Engineering the “Muse”: Case Studies, Volume 4

Odds and Ends: Noah Kagan competition results

Thank you so much to everyone who participated in Noah Kagan’s contest! For those who haven’t read his post, Noah made a simple offer: The reader who generated the most profit in two weeks with their new business or product would win $1,000 of AppSumo credit and RT airfare for a romantic candlelit taco dinner in Austin, Texas.

We had some truly amazing entries, and ended up having to split the prizes. Here were the results:

WINNER: Tom from RaceCrowds.com, who made $600 profit in 4 days. Tom ran a sale on his site over the weekend, using many of the tips Noah suggested in the post:

“I basically did a Motorsports version of AppSumo. I did a 50/50 split with my promotional partner and Chompon takes 10%.

Stats from Chompon.com

Total Views: 981
Total Shares: 23
Total Purchases: 6
Total Revenue: $1,350.00″

Runner-ups: Adam Nolan and Russell Ruffino from ultimatesalesfunnel.net. These two made $17,867.64 in profit… “WTF?!” Yes, they did. However, according to the rules in the post, each competing business/product had to be brand new. Their product, while new, was created four days before the contest was announced. Either way: BIG congrats, guys!

All entrants: For everyone who made an attempt at starting up their million dollar business: Be sure to check your inbox for complimentary credit to AppSumo :)

(Photo: ElMarto)

Michael Ellsberg has been a good friend since 2000. 

In the last few years, he has made a study of self-study. How do the best in business do what they do? Using his findings, he has:

- Overcome a debilitating case of bipolar II (here’s how).
- Landed one of the most powerful literary agents in the world.
- Published not one but two books from major New York publishers, the second scoring a 6-figure advance.
- Found the woman of his dreams and married her.
- Built a well-followed blog on Forbes.com with zero prior blogging experience.

Most recently, Michael has interviewed the likes of fashion magnate Russell Simmons, Facebook cofounder Dustin Moskovitz, Facebook founding president Sean Parker, WordPress lead developer Matt Mullenweg, and Pink Floyd songwriter and lead guitarist David Gilmour. Dozens of iconic figures pepper his list of case subjects.

Why? Because none of them graduated from college, and he wanted to learn how they educated themselves. His findings were then encapsulated in “The Education of Millionaires.”

In this post, Michael will discuss how uber-successful people leapfrog their peers without any formal credentials. By the end of this post, you’ll have a roadmap for hacking “job requirements,” degrees, and the lot…

In the words of Alfonso Bedoya in The Treasure of the Sierra Madre:

“Badges? We ain’t got no badges. We don’t need no badges! I don’t have to show you any stinkin’ badges!”

There is a surprise ending to this post. Don’t miss it.

Enter Michael Ellsberg

A phrase you’ll see a lot if you search for a job these days is “BA required, MA preferred.” A recent New York Times article was entitled “The Master’s as the New Bachelor’s,” and ended with the following question:

Given how many people are now getting master’s to stand out from those with bachelor’s, “Will the Ph.D. become the new master’s?”

This anxiety around educational credentials has launched a million self-criticisms across the nation…

“Well, if I don’t have my BA, I better not even think about getting that ‘BA required’ job!” Or, for those who have a BA: “Well, that’s just like having a high school diploma these days. I better go back to school so I can spend two years and another fifty-to-hundred grand getting an MA. That way, I can stand out from all those BAs and compete with the MAs on an even playing field.”

The purpose of this article is to even the playing field for you, without the BA, MA, or MBA, and without the student debt. You can get those degrees for other reasons (if you feel they will enrich your life, for instance). But never again should you feel that they’ll give you a massive advantage in job searches or economic opportunity. For your typical job search, those advantages are massively overhyped. They can be sidestepped, outsmarted, and overcome.1

Forget the Formal Job Market—Focus on the Informal Job Market

At age 25, Eben Pagan had a resume that consisted of dropping out of community college after one semester, touring in a Christian rock band, and various stints at manual labor. Most people would say this resume qualified Eben for a life of asking “Would you like fries with that?”

Thinking that he might get into real estate, Eben signed up for a course by a real estate marketing and sales trainer named Joe Stumpf.

“I immediately recognized I had to somehow work for this guy and soak up his knowledge. But I didn’t know how I was going to do that. Here he was, leading big group workshops all over the country, and I was barely scraping by.”

Most likely, had Stumpf’s organization been advertising open positions (which it wasn’t), those positions would have had all kinds of job requirements attached to them. Eben, with his lackluster resume, wouldn’t have made the cut.

This, however, is where Eben began “hacking” the concept of job requirements and credentials.

“I started calling up his outbound telemarketers. These guys are trying to sell you on something, so they’ll talk to anyone! I told them about my experience at the workshop and became friendly with them. I found out they were all fans of Tony Robbins. Once, I found this set of Tony Robbins tapes at Goodwill for ten bucks, so I packed the tapes up and sent them to them. Things like that.

“One day, they sent me some audiotapes of Joe. I called them up and said, ‘The audio on this program is not good.’ I had a background in sound from my band days. So I talked to the general manager of the company, and I went to work for them, first doing audiovisual for their live seminars. I worked there for three years, rising up the ranks.”

The skills Eben learned in those three years, studying from a world-class master of marketing and sales, set him up for the massive business success he’s had in the rest of his career. Shortly after, Eben began selling info-products (mainly e-books, membership communities, Web-based trainings, and in-person weekend workshops) on the Internet. Today, Eben’s company, Hot Topic Media, now brings in around $30 million a year in revenue and employs about 70 people around the globe. He founded it himself, and grew it over a decade with no investors. He is a self-made multimillionaire, and would never have to work another day in his life if he didn’t want to. He runs his business off his MacBook, and spends his time either working from his home office in New York (which has a majestic view of the Empire State Building), or his beach-side home office in Miami.

The story of how Eben got this all-important first job demonstrates a distinction that will be crucial for you in seeking opportunities throughout your life, no matter the status of your formal credentials.

It’s the distinction between the formal job market and the informal job market.

The informal job market comprises all jobs that are not filled through someone responding to a job advertisement. Usually, these are jobs that are filled through relationships. Either there is a position at the firm that needs to be filled, and an employee at the firm knows someone who’s qualified. Or, the firm wants to bring a specific person they know to join the team, and they create a position for that person out of thin air.

If you do some Googling on the informal job market, you’ll learn something shocking: according to various estimates (on CNN, CBS, MSNBC, and NPR) somewhere around 80% of jobs get filled informally. In other words, only 20% of jobs get filled through people responding to job ads (the primary method of job seeking most people do).2

So, how does the 80% of hiring that occurs in the informal job market actually happen? The way Eben did it: by building up a professional relationship with people within the organization doing the hiring, long before the hire is made.

Connections. Referrals. Knowing people who know people.

This means that, in the vastly larger informal job market, human relationships and a solid network are far more important than GPA figures on a resume.

Yet, nearly all the educational and career advice you’ll get (focused on making your resume perfect for recruiters) optimizes you for competing on the much smaller and tougher formal segment of the job market, rather than on the informal job market. Seems a bit ridiculous, given that the informal job market is much larger and easier to “hack” into.

Employers Require Skills, Not Degrees

What’s the relevance of the course content for a BA or MA program to a typical corporate job? In most cases, absolutely zippo. What employers actually mean when they say, “BA required, MA preferred,” is that they want prospects with a certain set of skills, character traits, and attitudes. Specifically, they’re looking for organizational skills, the ability to follow instructions and make deadlines, critical thinking skills, writing and communication skills, research skills, and so forth. Plus, they want applicants with the general maturity, stability, perseverance, respect for authority, and work ethic required to get through a multi-year academic program.

In the formal job market, there’s no easy way for employers to rapidly assess all of those traits without some kind of objective screening tool. Educational attainment has become that screening tool.

So let’s get clear about one thing. Saying that a BA and MA is “required” to do a certain job is BS. These degrees are not actually required to do the job well. Rather, they serve as convenient screening tools for recruiters needing to wade through piles of cold resumes on the formal job market. That’s it, nothing more.

Your entire multi-year, six-figure education is reduced to a simple check-mark used to get past impatient screeners on the other end of a Craigslist ad.

For a person seeking a job or economic opportunity, this whole system of job screening is wildly inefficient.

What if instead, you focused on the informal job market, which is vastly larger and more accessible (especially if you learn some basic networking skills)?

The screening process in the informal job market does not happen through cookie-cutter grades, degrees, scores, numbers, or letters. It doesn’t happen through educational checkboxes and punchcards.

Rather, the screening process is embedded within human relationships: whom do you know, and who knows you? It happens through the layers of trust, credibility, and reputation that occur naturally within flesh-and-blood, offline social networks.3

Thus, in seeking opportunity within the informal job market, your networking, connecting, and relationship-forging skills are far more important than your academic test-taking skills. (I’ll be giving you some specific pointers on how to begin learning these real world skills in a moment.)

Formal credentials are not irrelevant in the unadvertised job market. All else equal, it’s still better to have more educational attainment than less. But that “all else equal” is the kicker, because within that is buried the “else” that actually matters in the informal job market: social-based credibility, referrals, your online and offline reputation, and your portfolio of demonstrable results achieved in the past.

Thus, the informal job market allows for many creative ways to hack “job requirements,” by simply developing relationships with the employers, as Eben did. People like to give economic opportunities to people they know and trust. Requirements be damned.

Create Your Own Damn Credentials; Create Your Own Damn Job

Most people wouldn’t dream of opening a designer wellness center, charging $500 per hour to coach VIP corporate clients on weight loss, if they didn’t already have some serious credentials to their name (at least a registered dietician, if not an MD or a Ph.D. in nutrition).

Unless you’re my wife, Jena la Flamme. Then you do it without even having an undergraduate degree.

Jena dropped out of college her junior year to travel around India for two years using the $6,000 she earned teaching English in Martinique. (You can get a great real-world education traveling around India on $3,000 a year, which is far cheaper than most colleges.)

She had struggled with overeating and binge eating throughout her teens, and was perpetually trying to lose twenty pounds. Through self-education in eating and nutrition, she was finally able to end her struggle with food, and lost the weight. She started coaching other women on how to do this, initially charging $100 an hour for her coaching sessions.

Reading The 4-Hour Workweek inspired Jena to build up an outsourced backend office in India, which allowed her to handle a higher volume of business and ramp up her coaching to the masses, offering one-to-many Internet-based classes. She began studying marketing and sales (learning much of it from college dropout Eben Pagan), and her business exploded.

Soon, Jena’s time became so scarce as her business grew that, if clients wanted access to her training, they started having to pay more and more for it — $200/hour, then $250, then $300 and up. Today, she charges more than a lot of lawyers and Ph.D. psychologists make per hour.

Her credentials? A large following online, free content in her blog and newsletter, a great set of real-world testimonials, her public image and reputation through great marketing, and her personal story.

Jena hacked her professional credentials.

By the end of this post, you’ll know how to do this for yourself.

Common Objections to Hacking Job Requirements, and The Yellow Pages Portfolio Fallacy

“But the higher the degree you have, the more you earn, on average!”

Yes, it is undeniable. The College Board reported the median income for various degrees back in 2010. This is what they found:

- High school diploma = $33,800
- BA degree = $55,700 (65% higher than those with a high school diploma)
- MA degree = $67,300 (21% higher than those with a BA)
- Ph.D. = $91,900 (36.5% higher than those with an MA)

Yet these statistics suffer from a rather serious problem. I call it the Yellow Pages Portfolio fallacy.

Imagine investing $1 million in the following manner: You are to call up companies in the Yellow Pages, in alphabetical order, and see if they’ll take $100,000 for a 10% stake in their company. The first ten companies that say “yes” will complete your investment.

That’s your $1 million portfolio.

Now, compare the financial future of two people who have an identical overall investment portfolio (stocks, bonds, real estate, etc.), except that one person also has this extra $1 million Yellow Pages Portfolio on top of all their other investments. Who earns higher returns from their overall profile of investments?

All else equal, the person with the Yellow Pages Portfolio.

Therefore you should invest $1 million in the Yellow Pages Portfolio, as well.

Uh, actually, no. That is the Yellow Pages Portfolio Fallacy in action.

All the example above suggests is that having an additional $1 million in net capital (no matter how moronically it is invested) is financially superior to having $1 million less in net capital.

The example says nothing about the best way for you to invest $1 million!

The above College Board statistics, which are the basis for nearly all public arguments about the financial advantages of higher education, are riddled with the Yellow Pages Portfolio Fallacy through and through.

All they show is that, on average, people who have invested more in their learning earn more. Big whoop. They will never answer the more important question: Is spending your time and money on formal credentials the best way of investing in your continued learning?

I’m not sure of a way to test that latter question with anything close to scientific rigor. However, we’ve seen that formal credentials have a much higher salience in the formal job market (which is the smallest part of the job market). Cheaper and more informal modes of career development, such as learning to become a great networker (à la Eben Pagan) have a higher bang for your buck in the informal job market, which is vastly larger.

So, my own unscientific guess is that, outside of fields which legally require credentials for licensure, there are far more efficient ways to go about investing in your earning power, rather than increasing your formal credentials. Just as there are far better ways of investing $1 million than in the Yellow Pages Portfolio.

“But degrees are an advantage in a tough market.”

Yes, and it would be an advantage for heightening my wife’s attraction to me if I showed up for our next date night in a custom $100,000 Alexander Amosu suit.

Talking about an advantage in absolute terms, without comparing it to the costs and benefits of other options (i.e. opportunity cost), is pointless.

To extend the analogy: Given the resources now available to me, are there ways I could go about increasing and maintaining my wife’s attraction to me which would be more effective, per dollar spent, than buying a $100,000 suit?

Using the 80/20 principle, I can think of a few things that would go 80% of the way towards increasing her attraction for me, without having to spend a lot of money. Perhaps a thoughtful handwritten poem, a home-cooked meal, a massage afterwards (or even something learned from, um, that section, in The 4-Hour Body). I could live without that last 20% of extra attraction the Amosu suit would get me (hot as it is), and save the hundred grand for other things, like a home for us.

There’s no question that increased formal credentials can give you an advantage. The question is, is it the best advantage you can buy with the amount of money and time you’re going to spend?

A master’s, for example, can cost two years, up to $100,000 in tuition (hmm, similar in price to that custom Amosu suit), and another $50,000-$100,000 in foregone earnings. Sure, that will give you an advantage. But the primary advantage it gives you is in slipping past screeners in the formal job market, where there are such things as “job requirements.” If you get creative in the informal job market (and outside of legally licensed fields like law and medicine), the notion of “job requirements” is—as we’ve seen—negotiable. Thus, the advantage a master’s gives you is far less salient.

I could think of a lot of ways you could spend $100,000 and two years that would give you a better advantage in the informal job market, over having a masters degree or even a bachelor’s. In fact, I’m going to outline an example of how I think you could spend a fraction of that $100K and get far superior results in just a moment.

“So… what should I do?”

There is no good data (and I don’t think there ever will be) on what the best way to invest in your own learning would be. There is only data showing that more investment in your learning is better than less. (Duh!)

In the absence of any data suggesting what the best investment in learning is, you will need to rely on your gut.

If your gut tells you that investing in your own continued learning informally would be the most effective for you, then don’t let the salesmen of formal credentials scare you out of it. The other option, of course, is to spend years of your life in an undergraduate or graduate program, dropping major cash on tuition, incurring foregone earnings, and going into massive debt in order to rack up ever-more formal credentials, so you can “compete” with millions of others getting the exact same credential each year.

If you instead decide to make more informal investments in your learning for success, over your whole life and career, my book is designed to point you on the path to getting started.

In the spirit of blogging, however, I’d like to give you a robust outline of how to go about investing in your own success in the informal job markets. This content is original to this post, and is not even in my book.

As I present this outline, I will assume that you are currently unemployed, and that you’re willing to devote full-time effort into finding employment or creating a practice or business. In other words, you’re willing to invest all the time you’d otherwise spend surfing Craigslist jobs sections, sending out resumes and cover letters (and hearing crickets), to hacking job credentials instead.

I did not follow the path below exactly—my path was much more random and meandering, and took about 10 years through trial and error. Instead, I’ve tried to distill what I’ve learned from this decade into something clear and simple that could be followed by a focused, determined person, in one year. If I were to do it over again, this is how I’d do it.

Without further ado, here are my 9 steps to conquering the informal job market within one year (at a fraction of the cost of a Master’s degree.)

Step 1: Choose Your New Field of Learning

Timeline: Month 1 (Starting out)

Figure out a field you’d like to build a career in. You don’t need to have great (or any) formal credentials. As I said earlier, the more creative and less regulated a field is, the more amenable it is to this kind of job credential-hacking. It’s easier to hack job credentials in programming, design, writing, sales, photography, multimedia, the arts, and entrepreneurialism, or in general “I need a job, any job!” type situations, than in accounting, law, or medicine.

So before proceeding to the next step, you’ll need to choose a field whose formal job credentials you’d like to hack. My field of choice was commercial writing.

Cost: $0

Time: An epiphany in the shower; a long walk on a beach; a few hours surfing Google.

Step 2: Showcase Your Learning

Timeline: Months 1-2

In this step, you will start a simple blog detailing your journey to learn everything there is to learn in this field.

But first, you’ll need to kickstart the learning process: Read one professional, business, or how-to book related to your chosen field per week. Choose a mix of classics in the field, along with some off-the-beaten-path books you discover through your reading and research. These books are typically written by active practitioners in your field; they are not the abstract books written by theorists, which tend to get assigned in academic programs. Thus, these books (written by actual, successful practitioners) will be infinitely more valuable in terms of streetwise content.

Then write one blog post each week detailing exactly what you learned from that week’s book.

This kills at least ten birds with one stone:

1. You get the education of reading practical books related to your field.
2. You demonstrate to potential clients/employers that you understand content related to your chosen field.
3. You demonstrate your willingness and curiosity to continue upgrading your knowledge in your chosen field.
4. You demonstrate your researching ability.
5. You demonstrate your writing ability.
6. You demonstrate your critical thinking ability.
7. You demonstrate your creativity.
8. Through your writing, you develop and demonstrate your unique professional personality and character, setting you apart from the zillions of faceless resumes.
9. You develop and demonstrate your social media skills.
10. You begin developing your professional brand, not as a job-seeker in your field, but as a thought leader in your field

Cost: $12-17/year in blog hosting; $10-$20 per book, or $0 per book at the library. (As Matt Damon said in Good Will Hunting: “You wasted $150,000 on an education you coulda got for $1.50 in late fees at the public library.”)

Time: 1 hour to set up a WordPress blog. 10 hours per week to read two books. 4-10 hours per week to write two blog posts. Do this for 2 months initially, so you can accumulate a portfolio of 16 posts.

Step 3: Learn the Basics of Good Networking

Timeline: Still Months 1-2

Being a good networker is not an optional skill if you want to succeed in the informal job market. It is the skill. You’ll also need to be good at your craft and good at sales (we’ll work on those in a moment). But without a firm base of networking, you’ll get nowhere.

Here is a 1-hour lecture I gave on how to become a world-class networker. It’s the best breakdown of good networking I know of, and it includes two live demos of networking skills in action.

I delivered that presentation to the inaugural class of Thiel Fellows: 24 people under 20 years old, whom Peter Thiel is paying $100,000 each to “stop out” of college for two years and build businesses. Since they’re not getting traditional formal credentials, these brilliant young people are going to need to learn how to get past the screeners of opportunity informally—which is what I taught them in this hour.

If you’re more of a reader, here is a similar post on how to become a great networker. In my experience, the vast majority of people go about networking in exactly the wrong way. The video and article show you how to be one of the rare few who do it right.

Following the advice in the article, find three business owners per month you already know (either offline or online). Over the next two months, have conversations with them about what their challenges are, then do your damned best to start being of service to them. By the end of two months, you will have six new fans. And those are very good fans to have, because business owners know other business owners.

You’ve started to build what I call a “social economy”—a circle of successful business owners whom you support, and who support you. Keep building this social economy as much as possible during the time you go through these steps. It will be your secret key to success in the informal job market.

Cost: $0.

Time: 20 hours a week for the first two months. After that, fit in as much time as possible between the activities of other steps.

Step 4: Within Your Budding Social Economy, Start Working for Free

Timeline: Months 3-5

Begin to seek opportunities where you can practice your skills. Offer small, light services related to your chosen field for free to people in your network.

If you’re trying to hack credentials in design, offer free design services. If it’s copywriting or advertising you’re interested in, offer free copywriting or ad design to small businesses you patronize. (Small businesses rarely turn down free services!)

Say, “I’m training to become [X], and I’ve been meticulously studying the craft to learn how to do it well [link to your blog]. I’d like to offer you [some free services around X] as I build my practice. I don’t expect any payment at all. But down the road, if you like my work, perhaps you can refer me to other people you know who might benefit from it.”

Cost: $0.

Time: 20 hours a week spent in a combination of networking to get the gigs, and actually delivering services. Do this for 2-3 months.

Step 5: Develop Case Studies of Your Work

Timeline: Still Months 3-5

For 10 hours per week (when you are not networking or delivering services), blog about your experiences providing these services as case studies. Lessons learned, triumphs, mistakes, etc. Ask your client if you can use their name in the blog post, and show them what you’ve written before it goes up (so you don’t infringe on their privacy). Otherwise, hide and change all identifying details about the work.

Cost: $0.

Time: 10 hours per week, during the same 3-month period as in Step 4.

Step 6: Develop Relationships With Mentors

Timeline: Still Months 3-5

For the remaining 10 hours per week of this period, reach out to authors of the books you read and blogged about in Step 1, asking to interview them for your blog. The more time has passed since their last book came out, the more likely they’ll be willing to do the interview, as authors are almost always thrilled when someone shows interest in past work. (However, if they’re in the middle of writing or launching a new book, forget it! That’s like asking a pregnant woman for help when she’s about to go into labor.)

Now you are in the process of developing relationships with potential mentors in your field. This will pay off huge over the long run (for your career, personal development, and inner fulfillment).

Cost: $0.

Time: 10 hours per week, during the same 3-month period as in Steps 4-5.

Step 7: Learn Sales

Timeline: Months 6-7

Sorry, there’s no way around this. If you don’t learn sales, you will never reach the level of success you desire. Almost without exception, anyone who has achieved anything big in life was good at sales; if not literally selling products and services, then selling their ideas/vision.

Read SPIN Selling by Neil Rackham. In my opinion, this is the best book on sales ever written. The focus is on deep inquiry into the customer’s actual problems, needs, dreams and desires — through asking the right questions and listening well — rather than through sleazy pitching. If you’re only going to read one sales book in your life, that’s the one you’ll want to buy.

Once you feel you have a basic grasp of the concepts in the book, find someone in your social economy (see Step 2) who has some kind of business, whether it’s products or services. The bigger the ticket price, the better, as there is a direct correlation between the ticket price of the sale, and the integrity, empathy, listening skills, and caring you have to have as a salesperson in order to sell it.

Ask if you can sell for them, with zero base salary. Perhaps you can get a commission, or perhaps not. But at this point, you’re not doing it for immediate financial gains. You’re doing it to get experience in sales, and to put what you learned from SPIN Selling into practice. The reason you’re doing it in an already-existing business (rather than your own) is that you want to get lots and lots of experience actually selling face-to-face with pre-qualified prospects, not trying to find people to sell to! My own freelance income nearly doubled when I learned proper, effective, non-sleazy, high-integrity sales.

Cost: $16 for SPIN Selling. And you might actually make money in sales commissions.

Time: Devote 20 hours per week to a combination of studying the book and putting the techniques into practice in a friend or acquaintance’s business; devote the other 20 hours per week during this period to continuing Step 3 and building your social economy.

Step 8: Sell and Deliver Your Services Within Your Social Economy

Timeline: Months 8-9

You’ve got the basics of your craft in place (credentials be damned!), you’ve built up your social economy, and you’ve learned sales. Everything is in place for you to start earning real money in your chosen field. Now you just have to go out and do it!

Have individual meetups with 10 business owners — the ones within your social economy — over breakfast, lunch, dinner, or drinks. Tell them about the portfolio of results you’ve achieved in the last seven months, both online and offline. Have honest-to-goodness conversations about their needs (a high-integrity sales skill you learned during Step 7).

If they have a need you can address, use your SPIN Selling skills to get them excited about the idea of working with you. If they don’t have a need you can address, connect them with someone else in your social economy who you think can help them. (This is Networking 101: refer people to the best solutions for their problems.)

Tell them about the specific type of problem and/or business owner you can help, and ask for their best three ideas for meeting that kind of business owner. You’ll usually come away with several great ideas, and possibly even some referrals.

If you have been following the steps diligently, you’d have to get worse than a 1/10 closing ratio to not get a sale. If you can beat that (pathetically low) closing ratio, you’ve got a sale.

Congratulations! You’ve just hacked “job requirements” in the informal job market.

Cost: $0.

Time: 40 hours per week spent networking, conducting sales meetings, and delivering services on the sales you close.

Step 9 (Optional): Rinse and Repeat

Timeline: Months 10 and beyond…

If you continue to build on all the skills in Steps 1-8, you can carry on as a self-employed freelancer, working on your own schedule (often from a remote location), for the rest of your life. It’s not a 4-hour workweek, but it definitely allows you to “Escape 9-5” and “Live Anywhere.”

This is the lifestyle I’ve built up for myself over the last decade. As I mentioned, I took a much more meandering path than the steps above to get there, but if I was to do it all over again, that’s how I’d do it.

The steps I’ve described above take about 9 months, the time of one academic year. The cost is around $300, mostly for books (less if you go to the library). The entire cost of this program is less than the cost of 2-3 textbooks in college, and is an infinitesimal fraction of the cost of a year’s tuition at a private college. Yet I believe the results you could get from this 9 months of self-study and $300 will far surpass the career results you could achieve through a BA or MA program. With the right focus, these steps can guide you through the basics of getting started in just 9 months. Instead of birthing a baby, you are birthing a new life for yourself, of freedom, and prosperity.

Contest: Win 6 Months of Private, 1-on-1, Free Mentoring

The thing that frustrates me about all the statistics around dropouts vs. graduates, is that they always compare people who stayed in college, to people who not only dropped out of school, but who also dropped out of learning.

Take two cohorts of good, smart, motivated, ambitious 18-year-olds with similar intelligence, discipline, creativity, and work-ethic. Put one through a BA program, and one through the 9 months of self-study I’ve outlined above. I believe the cohort of self-studiers—the kind of people I spent the last two years traveling across the country to find and interview—will kick the BA group’s asses.

In the absence of means to conduct such a formalized study as above, I’d like to propose my own little informal contest.

I’m going to give one reader a chance to have my own mentorship on these steps, free of charge, for six months.

During this mentorship, you’ll have two in-depth phone conversations with me per month, along with follow up emails in between. And, if it makes sense, I’ll try to connect you with some amazing people in my network.

This contest is for any and all readers who were inspired by this article. It doesn’t matter if you’re young or old, if you’re a high school dropout, are in school now, or a graduate of Harvard Law School. It doesn’t matter if you’ve been unemployed for years, or are successfully employed now but wanting to switch careers.

The only rule for following this is: you must choose a field you have absolutely no work history, credential, or experience in. It must be a completely fresh field for you, starting from scratch.

If you don’t have full time to devote to this, due to school or work obligations, and can only devote your off-hours to this, no problem! I’ll take into account the whole picture of your life in choosing the winners. But no matter how much time you devote to it, the area you compete in must be completely new and fresh to you.

Here’s how to enter:

1. Commit to yourself to follow the 9 steps above for the next 9 months
2. Create a blog exclusively dedicated to detailing your journey of self-education along these 9 steps (as per Step 2.) It must be a new blog, not one you already own.
3. On December 29, 2011 (three months from the date of this post), I want you to post a URL in the comments that links to a post on your blog detailing your progress. I will pick one person from these links to mentor for the remaining six months. I am looking for QUALITY of results achieved in three months, rather than speed of working through the steps. I would rather see someone get up to Steps 4 or 5 really really thoroughly in three months, than get to step 7 in a slipshod manner.

There you have it. My curriculum for excelling in the informal job market. Go out and make it happen :)

Final Thoughts

You might think that college dropouts who become successful are “outliers,” and if you look at the statistics, that is true.

But that statistic is misleading, for a simple reason pointed out to me by my mentor Victor Cheng:

Most people who drop out of school also drop out of learning.

If you drop out of learning, you’ll always be stuck in jobs that require little more than a pulse, such as mopping floors, or asking people about their desire for fries. That’s why most dropouts are in dead-end jobs.

However, there are people who drop out of formal education, while still maintaining an absolute passion and discipline for learning—informally, non-institutionally, in the real world (and without the tuition bills or student loan payments). Those are the types of people I interviewed in my book, people like Eben and Jena. They dropped out of school, but they never dropped out of learning.

I spent the past two years interviewing the world’s most successful people who have the least formal credentials for their success. I’ve interviewed almost 40 millionaire and billionaires, all self-made, and none of them finished college. In interviewing them, I was consistently struck by one thing they all had in common: a complete lack of regard for socially-sanctioned formal “requirements” for bringing success into their lives.

No wonder they have so much success!

I’ll leave you with a simple question: What barriers, check-boxes, and credentials do you believe in that are keeping you from the jobs, opportunity, and success you desire?

As you’ve seen, nearly all of these barriers can be sidestepped, ignored, or hacked. It just takes some creativity and a few months of work.

What’s holding you back?

Footnotes

1. This approach works better in some fields than in others. I do not recommend trying to “hack” the requirement of a bar certification or a medical degree, if you want to practice law or medicine! This approach should not be used for fields that require state licensure, obviously. However, for non-licensed fields such as programming, design, PR, marketing, IT, entrepreneurship, solo-preneurship, self-employed consulting and service businesses, journalism, sales, non-profits, the arts, and for your average “I need a decent job pronto!” type job searches, these approaches are golden. Back to Text
2. There are some debates about exact numbers and percentages. After all, it’s very hard to measure what’s going on informally behind closed doors. However, virtually all career experts I’ve seen quoted on the matter agree that vastly more jobs get filled informally than get filled by people responding to job ads. As Steven Rothberg, founder of CollegeRecruiter.com, says on the MSNBC article, “[a]bout 90 percent of job openings go unadvertised, yet about 90 percent of candidates apply only to advertised job openings.” Back to Text
3. Online social networking can be used to enhance/facilitate networking that is also happening offline, but it will never be a replacement. You can’t status-update a handshake or a good look in the eyes, and you can’t replace a two-hour dinner conversation with a tweet. Back to Text