This article is worth reading in its entirety –
Basic idea: To build a very large business, you need a high lifetime value fo a customer (“high” is relative to industry, and acquisition costs) or a high virality (so your cost of acquired user goes down over time, not up, which is what happens to most businesses).
Very smart piece… succinct and good points. Worth reading and meditating on.
I. This post outlines Patrick McKenzie - a brilliant technologist and entrepreneur - how he's done such amazing things and learned so much, and why he's getting drastically underpaid and how it's his own fault. This post will be most valuable for technologists who underestimate themselves and undervalue themselves.
II. Hacker News is the best tech community on the internet, and patio11 - Patrick McKenzie - is the best contributor there. I don't even think that's controversial, I think it would be near universally agreed by the HN crowd that Patrick has made as many or more important contributions as anyone.
If you're from Hacker News, you know Patrick already. But for my readers that don't know him, let me give you a quick overview.
III. Patrick is a multi-faceted genius, and I don't throw the word genius around casually.
Patrick McKenzie is many things - he's an expatriate to Japan, he's a talented coder, tester, metrics/split-testing/analytics user, a great writer, extremely modest and helpful. He can recruit people, evaluate talent, and manage people well. He understands ROI very well and is good at purchasing advertising. He's good at customer service. Outsourcing. Automation. Coding. Ecommerce.
I have just re-learned a very important principle about business and marketing, and I thought I would share some of this thinking.
Usually when I think about business, I am all about the back end. That is where the money is made, period.
So when starting new businesses, I always think about how to build the back end.
This is a mistake, and I’m forcing myself to start thinking differently.