How to Win in Las Vegas, And in Online Business

I’ve written a few contrarian things lately.

Specifically, I ranted a bit about why I think the most common “make money online” technique doesn’t work for most people, and about how, really, the most important ingredients of success are persistence and grit.

Then, on my own blog, I ranted about why “systems” for achieving specific results don’t work.

I got a lot of comments, emails, and tweets agreeing — too many people are looking for a quick fix, and we need to remember the basics: hard work, and good old-fashioned stick-to-it-iveness.

But believe it or not, there’s actually a problem with taking that train of thought too far.

Yes, a lot of the marketing for how-to-start-your-business products preys on the naive and is motivated by greed. But that doesn’t mean that there isn’t good information out there — information that could help you move forward, remove roadblocks, and arm you with new skills.

No, there is no magic bullet

But that doesn’t mean that you should become a business isolationist, figuring everything out solely on your own, wary of anyone, anywhere, who sells information.

The most sensible approach — as is usually the case — is somewhere in the middle.

Spending money on a fool’s dream is akin to gambling, hoping that some “system” will pay off big. By contrast, spending wisely — with a decent chance of a solid return — is more like an investment.

Obviously, the best way for me to explain the difference is by talking about my grandparents.

Gambling vs. investment

My grandparents used to go to Las Vegas a few times every year to play the slots. Every once in a while, they’d win, and come back with a few thousand dollars more than they left with.

More often, they’d come home having lost some or all of what they’d budgeted as their “fun money.” No matter what happened, they always returned happy, with new stories to tell, and couldn’t wait to go again.

So the question is: Were they gambling while they were in Vegas?

And the knee-jerk reaction is, “Of course they were. What kind of dumb question is that, Truant?”

Well, I don’t know. I’d define gambling as risking an asset that you can’t afford to (or don’t want to) lose because you’re hoping it will multiply. Investment, on the other hand, is spending an asset for a defined purpose to receive a return that you have good reason to believe you will get.

If my grandparents went to Vegas, plunked down their pension checks, and then hoped like hell to hit a jackpot so that they could at least recoup the money they put in, I’d say they were gambling.

But that’s not what they did. They set a budget. They “spent” that budget on the slots. If money came back? Aces. But if not, they wrote it off as part of the trip cost and still came home happy.

They went in with a defined goal: Have a fun trip pulling levers and watching things spin and light up. That’s what they got. They were investing in their entertainment, and in their own enjoyment.

Similarly, I’d argue that what makes a business expense gambling versus an investment is the intention you have when you make it.

How to invest in your business

Are you gambling on schemes, or are you investing in information you can use? The line can seem fuzzy, but I’ll bet it’s obvious once you start looking for it.

Ask yourself what you hope to get out of a purchase. You can buy the craziest, most harebrained get-rich-quick course out there, but you’re investing if you have a realistic outcome you want to see from that purchase. (I’ll talk later about some ways that could happen.)

Or, you can buy the most conservative, reputable, boring instructional course in existence and be gambling, if you spent your rent money on it because you hoped that it would revolutionize who you are and what you do, and fix all of the problems in your life.

If you find yourself thinking things like, “Maybe this course will work,” you’re gambling.

Because courses don’t work; students do. No one course or product will “do it” for you.

If you don’t know anything about a topic, yet think that buying one product will make you a ninja master at it, you’re gambling.

If you have a deadline in mind for how fast a course’s content “must work, or else,” you’re gambling.

If you’re spending money that you cannot afford to lose on the hope that you’ll quickly earn it back, you’re gambling.

Investing in information, on the other hand, is slower-paced and more laid back. An “investment” goal should feel reasonable. It shouldn’t make you overly nervous. It should be something you could tell your mother about without her suspecting that you’re one of P.T. Barnum’s famous suckers.

And the interesting thing? There are a bunch of ways to invest, and a bunch of desired outcomes. It’s not always about a cash return.

• Some people will invest in a course specifically to see how the creator put the course together, and how he is able to justify the cost.
• Some people will invest in a product simply to get on the radar of the seller, to set up a connection that they might later be able to turn into a working relationship. (This wasn’t my intention when I bought Naomi Dunford’s Online Business School, but that’s what happened. How much did I get from the course? Who knows? But how much did I gain from meeting Naomi? Um, a whole lot.)
• Some people will buy a product with the intention of learning only ONE tiny tip from the whole thing, and then applying that one tip to make back the price of the course. It might be a quick return, but it might also be over a long time.
• I even heard a story once about a person who bought a very expensive product so that once inside the circle, she could have prospecting access to . . . well, to the kind of people who could afford to buy a very expensive product.

Still not sure? Here are my three big rules for the “right” way to invest in an information product, a course, coaching, or a service:

1. Know your intended outcome

Even the most expensive, overhyped purchase isn’t a gamble if you enter into it knowing what you can reasonably expect to get out of it.

It almost doesn’t matter what that outcome is, as long as you know it in advance.

Maybe you want to make your money back over either a short or a long time.

Maybe you simply want to see the seller’s marketing sleight of hand.

Even if you say, “I’m pretty sure I already know most of this information, but spending $2k on it will force me to use it,” you’re going into the game with your eyes open.

Obviously, if you buy better stuff, it’s easier to go in with reasonable expectations of what you’ll get out of it.

2. Buy on value, not price

Dave Navarro took some flack in certain circles over his product How to Launch the **** Out of Your E-Book. The program cost $97, and people were outraged that a PDF could be so expensive. After all, you could go down to the local Barnes & Noble and get an actual paper book for $20!

That’s looking at price, rather than the value of the information being sold.

(And by contrast, because an information product consists of slick-looking MP4s with better special effects than Avatar doesn’t make it worth a dime.)

Don’t look at a file or a stack of CDs and ask, “Is this collection of pixels or bytes, in and of itself, worth X dollars?”

Instead, ask how much having this new information will, over time, allow you to earn. (And I can tell you without a doubt that if you read How to Launch and you actually take the advice he gives, you’re going to learn something that can improve your sales by a lot more than $97.)

3. Take responsibility

The hallmark of gambling may be high risk, but investment has risk, too. Even the soundest purchases can bomb on you.

When you decide to make any investment, own up to that risk. Be willing to lose what you spend.

Not everyone agrees, but my own philosophy is, I don’t hedge my bets going in, saying that if it doesn’t work out, I’ll ask for my money back.

I know, I know . . . this is heresy, but think about what the unconditional guarantee mindset says. It says that you’re putting the onus on the product to work for you, rather than on yourself to implement what’s in it. You’re saying to yourself, “I’ll give it a shot, but no promises.”

I always thought that it would be really annoying to own a restaurant, and have someone send a $30 steak back because they didn’t like it. Was it burned? No. Tough? No. So what was wrong? The customer just decided he wasn’t that hungry. Well, if the problem is on the customer’s end, then why should the restaurant have to eat the cost?

I’ve paid for products, coaching, and services that didn’t work for me, or that I just plain didn’t like. Unless a provider has deliberately lied or unless it’s obviously, demonstrably terrible, I don’t ask for my money back. I’m looking at one such product right now, on my shelf. It cost $1500, and had an unconditional money-back guarantee. I won’t ask for my money back, though, because there’s nothing wrong with the course. The problem is on my end, in lack of implementation.

You take a risk when you invest in anything (or, for that matter, when you eat at a restaurant). If you want to be 100% sure about everything, then honestly, you really shouldn’t be in business.

I don’t want to understate this: Investment is really important. You need helpers and partners if you want to be efficient and effective. You need information on topics that you don’t already know well. You need advice in order to grow.

And let’s not forget that the mere act of putting your money where your mouth is tells your brain that what you’re doing is a livelihood, not a hobby. Investment is a way of pushing yourself to take your business seriously.

Just know what you want to get out of a purchase before pulling the lever on the metaphorical slot machine.

P.S.

Nobody point out that my slot machine metaphor for business is flawed. Of course it is; I’m just being colorful. How exciting would it have been for me to tell the tale of when my grandparents went to Duluth to put a hundred dollars into a low-yield federal bond?

About the Author: Johnny B. Truant drives a flying saucer and invests in low-yield federal bonds. If you dig his mojo, you should join the Charlie and Johnny Jam Sessions for more monthly mojo than you can handle.