Dear Daughter (III)

Dear Daughter (III)

Another week, another letter. I have some exciting news to share, but more on that later.

I know you aspire to become a leader and a CEO. Almost all great CEOs are avid readers. If you want an easy recipe for success, it’s reading. Most people can read a page in 90 seconds. That means in just 22 minutes, you’ll read 15 pages a day. Form the habit now of reading for 22 minutes a day instead of watching some TV show you won't even remember next week. If you read 15 pages a day, you'll finish a book a month and 12 books a year. Over the next 80 years, you’ll have read 1,000 amazing books that will enrich your life and broaden your horizons. Here’s how to pick the best books:

• Time-filter: Most of what’s written today isn’t worth reading, but some survive the brutal time filter that buries most books. Use this to your advantage and skip the newest books that are likely forgettable. Go for books older than ten years that people still love and enjoy.

• Biographies: As you know, I love biographies, and I hope you will too. They are superior because they teach you about the successes and struggles everyone faces, history, and culture. Plus, they are a digestible way to find traits from others you want to incorporate into your own life.

• Recommendations from people you admire: I love learning what successful people are reading. Bill Gates reads widely and publishes book recommendations. Find public figures you admire and search for their book recommendations.

• Visit bookstores: Just like you often find clothes in stores other than what you came for, the same goes for books. Visit bookstores a few times a year and imagine that within their shelves are five books that will transform your life. Can you find them? Browse the aisles, be curious, and let luck strike you.

Now, back to our journey.

A little scared

Doing a product excites me. I’ve done product before. Not one, not two, but more than 200. Few things in life are better than when your product gains traction, except, of course, seeing your daughter grow up. When a product takes off, the demand is crazy; you can sell a thousand units while having lunch. I’ve had my share of successes: 25 products have sold more than 100,000 units in Norway alone. I created a bestseller at the MoMA store in New York, with sales of about 15,000 units a year, which is quite good for two stores in New York, and I even had a product copied by Intel.

At my craziest or best (depending on how you see it), I developed 82 different products in parallel with 70 industrial designers across Europe, working with 20 factories in Taiwan and China. We had created this super intense 10-week process with 10 key milestones. At the end of the process, we presented what most would consider finished products to retailers, asking for orders with a six-month delivery timeline. The challenge with such a process is that to keep the ball rolling, you must make decisions. June, if you assume that each product needs three decisions a week. With 82 products in parallel, the number of decisions is enormous. Thankfully, we had a great team and a smart process. Most people don’t realize that in product development, you can go from 0-90% quite quickly. At that stage, you have prototyped to convince you that you can make it, and awesome visualizations to engage retailers. If you even visualize the packaging, they’ll think everything is ready to go. When you then get a large order, you simultaneously say, “Oh yes!” and “Oh no!” The “Oh yes!” is for securing your first customer, reducing the project risk significantly. The “Oh no!” is because you have to deliver in 180 days, with a ton of work ahead and much that can go wrong.

Very little scares your dad, but products do. I know the dangers of doing physical products and have the scars to prove it: heavy investments upfront in development, tooling, and working capital for opening orders; products not working; products damaged in transport; products failing certifications; products that are too expensive; and, finally, products no one wants. So many things can go wrong, and many will no matter how good you are (do you remember the first iPhone and the challenges great companies have to make it right the first time). I’ve made most of the mistakes possible, but here’s the most fundamental one:

Developing a product that no one wants: In any business, or for a new product, there are, at its core, only two types of risks: Can you make it, and will customers pay for it? I’ve more often failed on the latter. Here are a few examples - please don’t laugh: I developed a hook for your handbag that grips the table harder if someone tries to steal it, a beach bag that transforms into a beach bed filled with sand to keep your valuables safe (the thief had to run with a bag weighing 60 pounds), a clock that counts down to your death and glows at you with a skull if you had a lousy day… and almost forgot: an apron so stylish you could wear it at your own wedding. It was made with an expensive Swiss nanomaterial that wouldn’t stain, no matter what. “June, can you guess what the problem was?” You got all the spaghetti sauce on your shoes and the floor.

Here is what scares me the most about doing products now:

• Too much comfort: For the past few years, I've been living the dream: making good money, zero risk, and a cushy lifestyle. Creating a product and building a business around it, well, that's a whole different beast. Imagine this: no money flowing in initially, yet significant investments pouring out. It's like playing Monopoly but with real cash and existential dread. Products bring a circus of worries - production, marketing, sales, logistics. And let's not forget the very real risk of failure: money down the drain, a bruised ego, and wasted time and energy. Yet, a part of me loves the thrill of being in the thick of it, not just consulting from the sidelines. Theodore Roosevelt captured this perfectly in his speech that gives me goosebumps every time:

2. Success: The Beginning of New Problems: If the product succeeds, it's not the end of the problems. It's the beginning of a whole new set. Imagine that the memory device is selling like hotcakes. You then realize you need to scale up production and inventory, which will require more capital. Let´s say we start by ordering 3.000 units costing 30 USD, 90K in total. If we succeed and quickly sell out, the next order might be for 6.000 units, costing 180K. The example shows that the business is doing great, but more and more money is needed. This is called working capital and strains most businesses, especially product companies, since they have to pay suppliers for products and marketing before customers pay them. There are actually companies with a negative working capital.

   “June, can you think of a business that gets paid before it has to cover its own costs?”

3. You have some obvious examples, like customized products, where the customer pays before the product is made, and then you have the more strange example of efficient retailers. An efficient retailer could be able to turn their inventory (all the products they have in their store) around 12 times a year. In other words, if the cost of all their products is 2 million and they sell products with a cost of 24 million, they sell out their inventory 12 times a year (once a month). If they had to pay their suppliers in cash when products are delivered, they would have a high working capital, but most retailers are good at negotiating and paying their suppliers in 60 or even 120 days after they have received the goods. In other words, the retailers get money from their customers before paying their suppliers; voila, they have achieved negative working capital.

4. Opportunity Cost: The Sneaky Expense: Opportunity cost might sound fancy, but it is essential in business and life and often something that people overlook. Please pay attention. Here's a quick example. Suppose you're going to school abroad, and it costs $30,000 for a year. Is that the true cost? Nope. If you got a job instead, say as a trash collector earning $40,000 a year, the real cost of school is $70,000 ($30,000 for school + $40,000 for the lost opportunity to earn money). Think of this whenever you feel like skipping a class. Similarly, this project might need $150,000 to land the first shipment. But when you consider what else I could do with my time, energy, and money, the real cost may be double. This decision could significantly impact our lives and what we can prioritize.

Despite these fears, I've decided I must try. Living scared is no way to live. Not taking chances and living the life that others expect of you instead of following your own path is one of the most common regrets of people dying. June, I hope you don´t end up regretting not doing your thing because of me or others' expectations of you. I just want you to be happy and live a good life.

“So, June, what do you think, do you support me or should I instead make lots of money as a consultant?”

With all my love and support,

Dad

P.S Just because I give you advice doesn´t mean that I am smarter than you; it just means that I have done more stupid shit than you.

P.P.S. Bad Blood is a business book that reads like a crime novel, with a woman as the main character. You will love it, and there are many lessons for women and aspiring entrepreneurs. One of the most important is when it is right to fake it until you make it.