Concepts

Concepts give a name to something so you can recognize them. These aren't original.

• Market forces. The market is just a system. Just as engineers study systems to design artifacts operating within those systems, entrepreneurs must study forces governing the market. MBA programs teach market forces through case studies.
• Problems. People will happily give you money if you solve their problem. Every product is a solution to a problem. Consumer problems exist on Maslow's hierarchy of needs. Business problems are harder to discover.
• Tool-based thinking. A problematic mode of thought where you believe success lies in what tool you use. Often success depends more on ourselves than the tool. Rarely is the tool the bottleneck.
• Inversion. Don't find success; avoid failure. Study the most probable failure modes and avoid all of them. Success is rare because the probability of at least mode of failure materializing is high.
• Value. Recognizing the value of things allows you to make money. If you can identify what something is worth, you can recognize when something is priced less than it's worth. You make money on the buy, not selling things more than they are worth. The asset can hold different values to different people at different times. Arbitrage is buying low and selling high and exploiting differences in value.
• Energy. A worker exchanges energy for money. Measure effort in energy instead of time. You can decrease the amount of energy required to complete a unit of work as you become efficient. You can also decrease the amount of energy required to complete a unit of work if you genuinely enjoy what you're doing. Lucrative just means a large amont of money for a relatively small energy expenditure.
• Annualized return on investment (ROI). The average profit generated in a year normalized by the amount required to invest. Evaluate all investment opportunities by their annualized return on investment for a fair comparison.
• Risk. The potential to bear loss. Islamic partnerships share risk appropriately across parties. Higher risk doesn't imply higher reward. However, higher reward normally suggests higher risk. Generally investments with higher return carry a higher risk. Expertise can reduce risk. Do not be afraid to take calculated risks.
• Alpha. ROI beyond baseline. Investing in a sharia-compliant mutual fund takes virtually no energy. Use 10% annualized ROI as a baseline. If you expend energy to create a business that is never expected to earn more than 10% per year from the initial investment, that initial investment could have just gone into the stock market.
• Competitive advantage. If you do something more efficiently than someone else, you can make more money playing the same game. If you know something other people don't know, the same principle applies.
• Reverse engineering. Some things are harder to reverse engineer and maintain a more durable value gradient. Other things are easier to reverse engineer, so you may spend a lot of energy to create it, but the moment you enter the market, competitors join you quickly after they see your success.
• Bottlenecks. Identify what actually blocks a solution before you begin working on a problem. Don't just work on the easiest part, the most visible part, or the most labor-intensive part.
• Switching costs. Migrating from one system to another costs energy. Engineers like to improve things, but improvements generally need to be 10x better than the existing solution.
• The Mom Test. If you have an idea and you truly want feedback, ask the right people. Most people want to be nice, so they tell you your idea is good. Often the people we ask are not the intended customer. If we're smart, we want to falsify our ideas like hypotheses. There's a book titled this.
• Follow the money. Study systems by understanding stakeholders and interests. Simulate in your head what each party wants and what control they can exert on the system.