Branson illustrates a very important principle, which really in a nutshell explains why retirement is a flawed concept. When you subtract work in the office, it leaves a void. It doesn’t automatically create life.
I know, for example, one entrepreneur, very successful, in his mid-60s, who acquired more than 120 companies in his career, and work was his life. He had no alternative activities and when he had quadruple bypass surgery and had to retire for health purposes, he only lasted a week, and then was so depressed that he had to start another company, because had nothing to fill that void.
Branson is a good example to someone who proactively designs a life. He seeks out the creation of these once-in-a-lifetime experiences over and over again and the latter portion of the book, called "Liberation", really talks about that. Once you create an abundance of time, how do you use it? It's not self-evident, as some people would think.
Scott: So it doesn’t necessarily have to be that you go spend the other 76 hours a week lounging on the beach in Mexico? If your passion is business and that’s what excites you and you want to go start another business or explore investing or work mentoring other entrepreneurs or serving on Boards of Directors, or those sort of things, then by all means feel free to do that, if that is what inspires you. Right?
Tim: Absolutely. One thing I've had to stress on when I’m talking to people -- because I do some odd things -- I travel to Argentina and spend six months there, competing in tango, or go to Japan to practice cage fighting – is that the intent of the book isn’t to teach people how to be Tim Ferriss. It’s to teach people how to use very specific tactics to create time and mobility. And once you have these two ingredients, then you can use them however you decide, whether that’s spending time with your family in your own home, or starting another business, or in my case, writing a book.
And the objective is really to automate income, so that your decisions are not financially driven, so that you can take a step back and really look at the larger picture of life and make decisions and invest your most non-renewable resource -- time -- in the most fulfilling way possible.Scott: That sounds like a great goal. I know that for a lot of people, it’s not even the ability to have it not be a financial decision, but just to be able to do what’s truly a good financial decision in the long-term, instead of having to be short-term cash-flow driven, like so many entrepreneurs are.
I've found that the number one issue for entrepreneurs or entrepreneurial companies ends up being cash flow. And this is where a lot of good companies go down. They get the product built, they get commitments, they get letters of intent, they get even contracts and receivables, but they end up in a cash flow crunch because they have that gap between the funding they have and the deals that they've got and having to deliver and execute everything in between in that gap. And that ends up being a problem for so many companies and why they end up needing mezzanine financing and end up needing bridge loans and all kinds of other stuff is because they end up having to chase the cash flow.
Tim: Right. Before I started focusing on lifestyle design and everything that it entails, from an entrepreneurial standpoint, what I was initially invited to speak at Princeton was ‘creative cash flow’ and how to, with minimal or no outside financing, achieve profitability. One of the most valuable exercises an entrepreneur can perform is to take a step back, not looking at what’s popular, not consider what everyone is doing or what people are expected to do, and really ask what rules you need to set for your own business, from a process standpoint and a cash flow standpoint, so that it can be successful.
So in my particular case, I started my company with less than $10,000, and now it's distributed in fifteen countries. That didn’t happen overnight, but I never required outside financing and the reason I was able to do that is, I recognized that certain rules like offering every large customer net 30, net 60, net 120 -- it was expected, but if you set a rule, which in my case was prepayment for all orders, if you are able to create the demand for that product, people would follow your rules.
And there is a lot of room to improvise. Just because business as usual can put you in a very awkward cash flow position, where you need to make short-term decisions and always feel like you are shoveling coal into the furnace without any breaks doesn’t mean that you can’t reset the rules in your favor. There is a lot of room for flexibility.
I was offered a distribution deal with one of the largest sports nutrition distributors in the country, in the world in fact, and I turned it down because I was able, for example, to control distribution to a few, very powerful and very well-distributed companies, and by limiting my distribution, I was able to prevent price degradation. So I didn’t have multiple rogue discounters driving the profit margins down for a product, which would necessitate that I create new products. I've had one main product for six years and I’ve been able to sustain the margin and maintain competitive advantage with primarily intelligent direct marketing and very heavy analytics.
But, it’s very important to set the rules in your favor. You do not have to follow what everyone else is doing.