Insights from The Power of Broke
Summary
The Power of Broke is Daymond John’s book focused on the idea that you are better off founding a company with limited resources. When your back is against the wall and you need to make a sale to survive, you will build a better business than when you have a backup plan and a lot of resources to fall back on. I like this fundamental premise, and I did learn some great things from this book, even though I would generally rate it as uneven (especially in the consistency and quality of the business anecdotes provided to back up the premise). I wish that the book went deeper into Daymond’s personal story founding FUBU, but he has also written three other books which may have already told this story.
Daymond John
Was born in Brooklyn in 1969, and raised in Hollis, Queens. He began small businesses as a child including snow shoveling and lawn mowing. He saved money working at Red Lobster and Church’s Chicken to buy a 15-passenger van, which he used to compete against MTA buses with cheaper, better service (dropping you off closer to home) until fines made it too costly. The van eventually became a critical component as a delivery vehicle for his clothing business. He founded FUBU in his mother’s house, sewing the clothes himself in 1992, while still working at Red Lobster. He managed to get FUBU product into rap videos, even getting LL Cool J to wear a FUBU hat in a Gap ad and to rap “for us by us” in the commercial. Puma acquired FUBU for $300 MM in 2018. He is best known as an investor on ABC’s Shark Tank. He now runs the Shark Group, a brand consulting firm. This was the third of four books that he has written Display of Power, The Brand Within, The Power of Broke, and Rise and Grind
Key Shark Points
S - set a goal
H - Do Your Homework
A - Adore What You Do
R - Remember, you are the brand
K - Keep Swimming
Key Takeaways
Power of broke
Starting from nothing is an advantage
“So here’s the big idea at the heart of this book: When you start from a place of nothing much at all, when you’re hungry and laser-focused on succeeding at whatever it is you’re out to do, when you’re flat-out determined to get where you’re going no matter what…well, then you’ve got a running start. You’re moving in the right direction, for the right reasons. On the flip side of that, when you start with all kinds of resources, when funding isn’t an issue, when failure isn’t about to break you…well, then you’re standing still.”
“…the power of broke is all about substance over flash. It’s about creativity over certainty. It’s about taking a shot over playing it safe. And here’s another thing: The money runs out after a while. Those deep pockets you may or may not have, they’ll never be deep enough to buy all the passion, ingenuity, and determination it takes to have success over the long haul. Even if you’ve got money behind you, there’s no guarantee that it will see you through. It’s the money in front of you that counts, after all. It’s the money you need, not the money you have, that makes all the difference”
“The power of broke is the half-court shot you fire up with time running out and the game on the line. It’s the shot your teammates won’t take because the likelihood of that ball kissing the net is pretty damn thin and they don’t want to mess with their stat lines. They’re playing the percentages while you’re playing to win—and this can mean everything. I don’t mean to mix my sports metaphors here, but I’m reminded of that great Wayne Gretzky line, “We miss one hundred percent of the shots we don’t take.” So, take the shot! Absolutely, take the shot. The power of broke is all about taking that shot”
Authenticity
Brands require an authentic voice to gain traction and followers
“Doesn’t matter if you’re in government, in business, in a relationship, today’s buzz words are transparency and authenticity. You’ve got to keep it real, people—and you can’t keep it real in business today if your strategy is to simply throw money at whatever roadblocks come your way, because chances are, money alone won’t get you past them”
“The bigger her base, the more Acacia keeps reminding herself that folks will keep checking her out online only if she keeps to her core values. Her mom, Melissa, helps to manage her career, and by this point there are other adults on the Acacia Brinley “team,” but Acacia has learned to respect the brand that’s emerged online. She would never endorse, promote, or otherwise highlight a product or service that doesn’t fit with who she is. What folks are “buying” with Acacia is Acacia herself, and she’s not for sale.”
There are no new ideas
“…let me give it to you straight: You will never create anything new. Twitter is just an updated version of a note tied to a pigeon’s leg. Facebook is nothing more than an endless chain letter, or another way to look at it, scribbles on the bathroom wall. Instagram is the scrapbook you used to keep and share with your friends. All there is, all there will ever be is a new form of delivery, a new way to market, and a new way to figure it out”
Success isn’t inherited
“Inherited wealth is no longer the common denominator among our wealthiest individuals and families. Do the math, people: that means 68 percent of the wealthiest people started with nothing. That means today’s entrepreneurs have greater opportunities and richer backstories than at any other time in our recent history, no matter how they started out in life”
Set a Goal
People with tangible goals written down are a lot more likely to achieve them
“According to a Harvard Business School study, 83 percent of the population does not take the time to set professional goals; 14 percent have goals in mind, but they don’t write them down; 3 percent set down their goals on paper and commit to them….Right away, you can see that if you simply make a record of your goals, you’ll be ahead of the game. But get this—the 14 percent with goals in mind are ten times more successful than those with no goals at all, while the 3 percent who write down their goals are three times more successful than the ones with unwritten goals….What’s the takeaway?…It’s a no-brainer—write down those goals, people.”
“At any given time, I’ll have about seven goals that I spend some time with about five days each week—I try to give myself two days in there where I can just relax, refresh. I’ll read over these goals at night, so they’re the last things I think about before I go to sleep. Sometimes this helps me to dream about them—that’s the idea. Then I’ll read them again in the morning, first thing—and the idea here is that I can hopefully make a small step forward in each of these areas if I set everything in motion before the rest of the day runs away from me.
Also, I put an expiration date on my goals, a clock. Some of them expire in a couple weeks, some of them in a couple months. Some I give myself years to see all the way through. When I write the goal down, I say what I want, the date I want it by, and a couple lines on how…With me, I always have a health goal, a family goal, a business goal, a relationship goal, and a philanthropy goal. Sometimes there’ll be a goal about achieving a certain type of work-life balance, or maybe a secondary business goal, especially now that I’m in Shark Tank mode and I’ve got all these different projects occupying my attention. Sometimes there’ll be a goal about financial security, or setting aside money for my kids.
Whatever it is, I keep it specific. And I try to keep in mind the visualization techniques I learned when I got started on the habit—because, after all, you can’t hit a target you don’t see”
Persistence
“…it helps to be relentless at whatever it is you’re pursuing—and if that kind of never-ending persistence is keyed in some way to a passion for the pursuit…well, then, you’re way out in front. But keep in mind—your passion has to make some kind of sense. Your idea for a business has got to be viable. Otherwise, what’s the point?”
Brands should be defined in 2-5 words
“I tell people to come up with their own two- to five-word definition of themselves, because if they don’t, they leave it to others to do it for them. The rapper Old Dirty Bastard even went so far as to put his two to five words in his name, because he was an old, dirty bastard—that’s the image he wanted to put across, and he didn’t trust it to others to figure out his personality without a little extra help.
Put another way, if you can’t put it on a bumper sticker, the guy behind you will never figure you out.
With FUBU, those words were right there in our name—For Us By Us. (That was really our hashtag—back before the term came to mean what it means today.)
With Nike, it’s Just Do It!
White Castle is What You Crave.
Apple is Think Different.
Wheaties is Breakfast of Champions.
The United States of America: Land of the Free.
For a long time, my two to five words were “I’m on a quest!” I was deep into search mode, trying to learn as much as I could and move myself into as many different arenas as possible.”
“One of the reasons Kevin was able to grow Under Armour into such a monster global brand was because he never strayed from his commitment to his core concept. “We became famous for making the world’s greatest T-shirt for when it’s warm outside,” he says. “That’s how we became known, and that’s what I tell people all the time when they’re just starting out. Be famous for something. We were famous for our performance T-shirt, which was unlike anything on the market at the time. After that, we set out to make the world’s greatest T-shirt for when it’s cold outside, so then we became known for that too. It doesn’t matter if you’re playing football, or bow-hunting, or playing tennis, or skiing, we’ve got you covered”
Invest in R&D, even in recessions
“According to a Harvard Business Review study on recession spending, innovative business leaders pushing through an economic downturn can help themselves by cutting costs and investing in growth. When times are “broke,” smart companies reduce costs by looking at ways to operate more efficiently, while continuing to spend on marketing and on research and development. (In some industries, it might even be a good time to acquire new assets.) The cost-cutting is necessary and can be looked on as a short-term move, but continued investment is also essential as a company looks ahead to an economic uptick that could set off another period of growth.”
Under representation of minorities and women in VC
“According to the University of New Hampshire’s Center for Venture Research, 67,000 “angel investor” deals were put together in 2013, totaling $24.8 billion; of that number, only 4 percent involved start-ups run by women and fewer than 1 percent involved minority-owned ventures”
What’s in it for them?
“When you’re pitching, you should never lose sight of the other person’s needs. You should think, What’s in it for them? and not, What’s in it for me?”
Mentoring
“75 percent of executives point to mentoring relationships as having played a key role in their careers.
• 71 percent of Fortune 500 companies have a formal mentoring program in place.
• Managerial productivity increases by as much as 88 percent when a mentoring relationship is involved.
• 95 percent of mentoring participants report that the experience motivated them to excellence.
Every entrepreneur needs a mentor. Don’t believe me? Check out these findings from a 2012 survey by MicroMentor.org, a matching service that connects aspiring business folks with volunteer mentors in their fields. The study showed that people who participated in a mentoring relationship saw their revenues increase by an average of $47,000—or 106 percent! Those who did not participate saw their revenues go up only $6,600—or 14 percent.”
Adore what you do
“When Mo talks about not being able to find a bow tie that “speaks” to him, I understand exactly what he means. With me it was about my kicks—I had a sneaker collection you had to see to believe, and the colors had to match up with my shirt, my jacket, some other part of my wardrobe, or the whole look just didn’t come together. Mo’s cut the same way. The kid likes to look good, and he likes to help others look good”
Sometimes you need a cheerleader
“Before publishing his first book, Stephen King was ready to give up on a writing career. After getting thirty rejections, he threw his first novel in the trash, but his wife retrieved it and urged him to keep going. He has since gone on to sell over 350 million copies of his books, most of which have been made into major motion pictures….It’s tough to believe in yourself when the rest of the word lines up against you, so be sure to have someone on your side to help you see things more clearly….Mentors are great, but sometimes a cheerleader is even better.”
Big businesses start small
“Coca-Cola sold just twenty-five bottles in its first year of operation….It helps to know even the big boys started out small….Go ahead and dream big, but keep it real out of the gate”
Stages of a brand
“…brands emerge over time—and they must pass through four different stages before they become huge, ubiquitous, unstoppable. You can apply these same stages to every entrepreneur as well—and what I’ve learned in studying the pop culture marketplace is that most times you have to get past each stage in order to reach the next one:
1. Item
2. Label
3. Brand
4. Lifestyle”
“Over at FUBU, we went through these same stages, one by one, starting when I was slinging generic tie-top hats and T-shirts from a duffel bag outside the New York Coliseum, to where we’d moved into dozens of different clothing lines, shoes, fragrances, and accessories. Folks came to know that they could hit us up at FUBU for almost anything they could wear or carry that would help them make a little noise when they walked into a club, when they hit the gym, when they sat down in a meeting or walked down to the corner to chill with friends.”
Cross selling / up selling
“One of the things I learned at Red Lobster, just to give you an idea, was that you didn’t make your money on the entrée alone. You made money on the appetizer, the desserts, and the liquor. Basically that meant we had to concentrate on “up-selling” the customers. Of course, the company was concerned with getting people in the door, but once they were in the door, we weren’t content with just getting that basic $25 average check per customer. We had to squeeze as much as we could out of that customer—that’s how the company made its money.
The takeaway here is, don’t just spend your time looking for new customers—spend time looking at ways to keep selling to the customers you already have.”
Cut costs by reducing portions
“They didn’t want to raise their menu prices, or put it out there that the customer was getting less bang for the buck, so they’d come up with a plan to kind of mask what they were doing. What it came down to was a single shrimp. Up until this time, our shrimp scampi entrées would come with eleven or twelve shrimp, and from this point forward they would be served with just ten or eleven.
It might have been a small shift—one stupid shrimp—but across the entire Red Lobster chain, it potentially meant an enormous savings in food costs. It was a great strategy, even I could see that, but it was not without a possible downside. A customer could notice and complain that he was being shortchanged—but nobody ever noticed, at least not in our restaurant, so the great lesson for me was that the little things can mean a lot. Even in big business, the little things add up.”
Omnichannel
“We don’t just want to buy online. We don’t just want to buy in-store. We want what we want when we want it”
Stories of Success
Instagram T-shirt art designs
“He told me he’d hit upon a great way to monetize his work. Somehow, he’d built a platform of over 100,000 Instagram followers, and each week he’d put up an original painting and announce to his followers that the design would be available on a T-shirt for the next twenty-four hours. It was a “one day and one day only” type deal, and off of that he would collect all these preorders for the limited-edition shirt, which he’d price at $40, $50, $75, whatever the case might be. Next day, he’d take his design to the screen printer, run off the precise number of shirts in all the right sizes to fill his order, and ship everything out. Every week, he’d repeat the process with a new design.”
Miniature dog homes
“Turned out there was a market for miniature dog homes, which were popular among super-wealthy homeowners looking to set their pets up in style. Makes sense, I guess. If you’re spending $4–5 million on a house, if you’ve got that kind of money, you wouldn’t blink at a $50,000 or $75,000 or $100,000 price tag for a doghouse built to look just like your brand-new McMansion”
Steve Aoki: record label at 19 for $1200. Few sales and constant reinvestment into the next record, next party, next show. Signed Bloc Party. Started djing.
Acacia Brinley: 4 MM followers across platforms. Started on Tumblr at 12 or 13. Her father was a photographer, so borrowed his camera to take much better selfies, everyday, when everyone was using fuzzy cell cams. Expanded to Instagram and Twitter.
“sponsors like Drop Dead UK, Brandy Melville, One Piece, and Nasty Gal, who pay Acacia some serious paper just to endorse their products and programs in her own genuine way. Even the folks at Pepsi, McDonald’s, and the Olympics have reached out to her for a marketing assist—that’s how plugged in she is to the pulse of her generation.”
Rob Dyrdek: at 11, got into his first skate competition 2 months after starting skating by negotiating with the organizers for a free pass if he got 10 people to pay to enter. “I’d talk to buddies of mine like Bam Margera, back when he was on Jackass, and he’d tell me how many boards he was selling through his exposure on that show, how many shoes, how many T-shirts, whatever. So before we launched our own show on MTV, I renegotiated every one of my licensing deals for super-high royalties and way-low minimums. What the hell did I care what they would pay me up-front? I had nothing, so I didn’t need anything. So I let it ride. It was all about the back end for me, and then everything just exploded.”
Christopher Gray: Entrepreneur, App Dev, College Student. App for tapping into scholarship money. $1.3 MM in scholarships.
Gigi Butler: Cupcake Boss. Nashville woman started a business with $33 and $100k in credit card debt. Dropped out of college to be a country star in Nashville. 100 stores in 24 states, $35 MM in annual revenue.
Jay Abraham: starts out in sales. Offers to sell 8 tracks in convenience stores on spec. Got the tapes on spec as well because the distributor wasn’t in Indiana. $4k per week with no Capital. Then bought an arthritis cream company and agreed to give revenue + 15% to radio stations for running ads on assumption of lifetime value of the customer. Product: Icy Hot, sold brand for $60 MM.
Kevin Plank: Founder and CEO of Under Armour. Football player at U of M, he wanted a more practical shirt for under his football gear. Everyone would take off white under shirts at half time, which was annoying and distracting. Wet tshirts weigh 3 pounds. Made an MVP of 7 shirts from stretchy material and tested them with his teammates. Lacrosse, baseball players, even girlfriends wanted one. Year 1: 17k, Year 2: 100k, Year 3: 400k, Year 5: 5MM, Year 10: 300 MM, Year 15: public and 1 BN. Tried to gamble $3400 in AC to cover 6k in bills and lost it all. Happened to have a $7500 check in the mailbox from Georgia Tech.
Moziah Bridges: Bow Tie Designer and middle school student and Tramica Morris - his mom. Started out making ties for himself, others asked so he made for them. Eventually got on Steve Harvey and had enough demand to outsource to local seamstresses. Developed a website. By the time he was 10, 6 soecialty shops in Memphis were selling the ties. Shark Tank producers actually booked Mo.
Tim Ferris: leveraged volunteering to organizing a charity event to meet successful people, and managed to befriend Chicken soup for the soul author. When he wrote his book years later, that guy got him his agent and editor. 27 publishers rejected the book before he finally got a publisher. Then had to guerrilla market it himself. Went to CES to get a bunch of bloggers to cover the book, knowing they get bombarded with pitch emails, in person convo was the way to sell the idea, one at a time. Befriended the check in lady at Bloghaus space with free drinks/wifi by being friendly and making drink runs. Turned out she was married to Robert Scoble, influential blogger he wanted to pitch. Then went to SXSW and repeat. Managed to meet the organizer and get a free slot when space opened up.
Josh Peck: actor, comedian, influencer. Nickelodeon tween actor. Then movie actor and comedian. Millions of followers on facebook, insta, Twitter, YouTube, etc. after his Nickelodeon show ended, made his own content on social media when he couldn’t get new jobs.
Linda Johansen-James: serial entrepreneur/ specialty retail. American Kiosk Management. Mall carts/kiosks. As small as 60 sqft. $2-15k per month in rentals, 3-6 months minimum. 1,000 of these locations. 800 owned and operated selling Proactiv. Her husband sold Metabolife, quickly expanded to 78 locations and lost his business. Start slow and build slow to avoid risk. Specialty retail now up to 20% of mall revenue. 50 MM customers in 15 years, 3.2 MM per year - this data makes no sense unless she’s shrinking. “Thousands of people walk by each one of our carts and kiosks every day. With a traditional in-line store, they have to be looking for something in particular, they have to seek you out. But with us, they walk by and we have three seconds to make an impression. If we’re lucky, we get another few seconds to try and make a sale. That’s the part I love about the business”
Ryan Deiss: Entrepreneur, Digital Marketer, Consultant. CEO of Digital Marketing. Consulting for brands to do digital marketing. Started a few years out of UT Austin. Taught himself web design from packaged software by just buying it and interviewing for jobs saying he was a designer. Then figuring it out the weekend before the job. The company was a spam factory. Stumbled into offering a bundled service of domain, hosting, and DIY software. First directing to other free software, then building his own version for the most popular links. Actually just licensed and rebranded a tool he liked for pop ups. Paid off the licensing deal in one month of sales. Had 500 mini businesses by the time he graduated. Would follow google search terms and create ebooks on popular concepts like how to make sushi - hire a ghost writer or license existing material. Google had adjusted the auto payments and he was now 250k down on the 500 websites. Cut down to the 4 or 5 that were actually generating significant revenue. And laid down the debt in a few months. Now didn’t pay his taxes not realizing he still owed even though he’d lost money. Now he owes another 250k to the government. Managed to raise the money from customers in 4 days by offering discounts and being transparent he needed the money to pay taxes.
Loren Ridinger: fashion trendsetter / internet retailer. Market America - MLM for online clothing sales before amazon or eBay. First product was a BS anti-smoking cream. Second was a weight loss supplement called Thermochrome that is still one of their top products. $60 MM sold in first 18 months. Then Isotonix, a vitamin powder you mix in water. Acquired shop.com. Over 180k consultants now. $6.5 BN in sales. $3.4 BN in commissions and 400 millionaire consultants.
Honey Flow
“In March 2015, Honey Flow launched a fundraising campaign on the Indiegogo site, looking to raise $70,000. This was the amount they thought they needed to grow their business to the next level—an affordable next step, a goal within reach. When the campaign closed a month later, they’d earned over $12 million in pledges from more than 36,000 customers all over the world, making it the largest, most successful campaign in Indiegogo history at the time.”
Mark Burnett: television producer and author.
“Time magazine calls him one of the world’s most influential people, with almost 3,000 hours of prime-time content to his credit, including shows like Shark Tank, Survivor, The Apprentice, and The Voice”
Grew up in London. Father worked night shift at Ford plant, mother worked late shift at car battery plant. Motivator was the fear of looking back at not having tried. First was a parachutist in the military. Saw combat in Northern Ireland and the Falklands. Then became an au pair in Malibu for $125 a week. Owner of the house owned an insurance company, and started working there too. Didn’t like selling insurance, but liked connecting with people. Then sold damaged luxury shirts on Venice boardwalk for half price. Quit the insurance gig and expanded the shirt business by getting 15 feet in front of someone’s garden for $1500 a month. Read business books and attended Tony Robbins seminars. Was making $2k a week on the shirts but it clearly had a ceiling. Had a friend who got more girls even though he made less because he had a development deal with a studio. He then licensed an eco adventure brand from Costa Rica to do events in the US. First event was so popular he sold the rights to cable TV. Put a helicopter rental on his credit card to get the best quality video when Discovery Channel wouldn’t pay for it. This turned into Survivor. For the first season, he got the Malaysian government to pay to scout locations.