By Brian Tracy
** Brian Tracy gave a keynote address to the Ambassadors and Council members of the National Association of Experts Writers and Speakers, during The Forum, at the United Nations Headquarters in New York. This chapter is an excerpt of that speech.
Everybody wants to be prosperous. Everybody wants to enjoy wealth. We want to have the good things in life.
People can have many different religions, ethnic backgrounds, philosophies and so on, but each human being wants to be secure financially. They want to have opportunity financially. And financial opportunity only comes through seeing and taking advantage of opportunities that come along; you have to be open to them.
Many years ago, I began to study economics at the Austrian School, which is a dominant school in many areas. What I found is that the entrepreneur is the sparkplug of all economic activity. It’s the entrepreneur who sees opportunities to bring together men, material, money, and resources to produce a product that can be sold at a price higher than the total cost of bringing it together.
That’s the unique entrepreneurial instinct. Now, the interesting thing is that entrepreneurs are a very, very rare breed. It’s been said that 99 percent of people can work at a job once the job is created, but only 1 percent of people can create jobs. Those people are the entrepreneurs and the engines of the economy. They are the ones that drive our society forward.
I began writing on this subject some years ago, and I came to a very interesting conclusion. Everyone going back to Einstein looks for what they call a unified field theory, one theory that explains everything within a particular area. For example, physical health is calories in, calories out. It’s as simple as that. Weight gain or weight loss is using up more calories in the course of your day than you consume. If you do that you lose weight; you’re thin, you live a long life, you’ll be happy, attractive and satisfied with yourself. If you don’t, you won’t. It’s a unified field theory: calories in, calories out.
In economics worldwide there is one unified field theory I’ve noticed. And, I’ve done my research. I have now traveled to 115 countries, speaking professionally in 72 of them, virtually every continent. The unified field theory is the rate of new business formation. More specifically, it’s the rate of new business formation relative to the number of existing businesses in any economy. Whether it’s a city, state, principality or country that rate is the critical factor that determines the future of that entity.
For example, if 6 or 7 percent of all businesses within any area will fold, collapse, go out of business, retire or close for a variety of reasons each year, for that area to grow it has to have new business form at a rate greater than the rate of the decline. So, that country, economy, state or entity has to grow at 8 or 9 percent. You’ll find that every single place that has a rate of high business formation also has a rate of growing prosperity, because every new business creates an average of five jobs.
Furthermore, this high business formation creates opportunities for people to develop skills. It creates and pays taxes; it pays for all the schools, hospitals, universities and everything else. Therefore, the role of government and the unified field theory on business formation is ultimately one thing. Their purpose is to create a climate in which there are natural incentives for new business formation.
A climate must be created which basically removes the restrictions that hold back business formation. With opportunity, the natural desire of entrepreneurs, of human beings, to improve their condition and be better in the future so they will actually grow like grass in the springtime. Whether it’s North Korea, South Korea, Taiwan, China, Finland, Canada, the United States or even Ghana and other countries in Africa, wherever a climate is created that is conducive to forming new businesses the economies prosper and there are more jobs and more opportunities for more people.
Now, I have studied entrepreneurship, and at this time have written over 72 books – many of them on business. What I find is that today is the greatest time in all of human history to be alive as an entrepreneur or as a businessperson.
There are more opportunities for more people to introduce more products and services to more markets faster and cheaper today than has ever been possible. If you wanted to start a business of some kind 10, 15, or 20 years ago you may have had to spend tens of thousands of dollars for registration, product development, office space and so on just to get the business started. Today, a teenager with a laptop at home has the computing power that NASA had when they landed a man on the moon. That teen can start a business in 100, or even 1000, different ways by sourcing products and services from people and then finding ways to market them to people who need them. It’s never been so possible for more people to begin businesses than it is today.
The other thing we need to look at is wealth creation. When I began studying self-made millionaires, the first thing I found is that most self-made millionaires come from new businesses. More than 80 percent of self-made millionaires worldwide are entrepreneurs. They started with an idea. Self-made businesspeople are those who started with nothing, and then found a way to match customers with products and services that they needed in order to make a profit.
Today there are about 10 million self-made millionaires in the world, and that number is growing at a faster rate than ever before. When I began my studies there were no billionaires. Actually there was one, John Paul Getty. John Paul Getty was the first oil billionaire. He was once asked, “What is the key to becoming a billionaire?” He said, “Work hard, tell the truth and discover oil in Saudi Arabia.
That’s what he did. He made a deal and for decades his company was the only company that could pump oil from the great oil pools in Saudi Arabia into a post-World War II world that was desperate for energy sources, and he became extremely wealthy.
Today, there are 1,845 billionaires, according to a recent Forbes magazine article. Out of those billionaires, 66% of them are self- made. Bill Gates today is worth 79 billion and he started with nothing. Gates’ friend, Warren Buffett, is worth about 59 billion. He started with nothing too. Michael Dell, Larry Ellison and the Wal Mart family are worth about 150 billion dollars today. They started with one man’s idea to open a small store, in a small town in Arkansas; it became the most successful retail operation in the world.
Look at the “Googles” and “Facebooks” and all the billionaires and multi-billionaires that have been created, all first generation. They even have an expression in Silicon Valley for this called a unicorn. A unicorn, as you know, is a mythical creature. Silicon Valley’s version of a unicorn is a person that has gone from zero to a billion dollars in revenue in three years. It was a phenomenal, never-heard-of thing in the history of the world. Now, there are 72 of them. There are 18 more who are going to hit this list by the end of 2015.
This also applies to your “Ubers” and your “Airbnbs” and so on. A person comes up with an idea like Snapchat and it’s bought for 19 billion dollars before they had even earned any revenue. They call them pre-revenue companies. That means they haven’t sold anything yet and people are snapping them up for billions of dollars. Then, they look at the justification for it and they can actually justify it on paper. Once you consider the number of names that they are capturing, the type of names, and the lifetime value of that customer you can determine that each customer is worth 65, 75 or 78 dollars for example. Then, multiply that by several million users and it makes an app like Snapchat worthy of billions of dollars.
This is stuff that is way out of my depth. As they say, “It’s above my pay grade.” However, what is going on today is wonderful for us. As I’ve just discussed, there is more opportunity than ever before for the entrepreneur to be able to start a business. Furthermore, our climate is set-up to be conducive to business formation, as is seen by the increasing number of self-made millionaire and billionaires. So, my question to you is, why can’t you be one of them? The only thing potentially blocking your path is the “know-how.”
“What is the first thing you need to start a business?” The answer is “An idea.” However, you have to expand upon that concept a little more. In order for your product or idea to be a success, you need to get validation. It is key to make sure people are going to want what you are selling. The best way to do that is create a product that matters to people. To paraphrase Zig Ziglar, find a need and fill it.
That notion is really the basis of all economics: find a need. Not a supposed need, or a hoped for need, or a wished for need, or a peripheral need, but a real need that matters in people’s lives.