I have friends that are making music, paintings, and films. They're all extremely talented, yet all of them are struggling.
Why?
Because they're not filling a need.
And I know what you're probably thinking: I listen to music, enjoy art, and love a good movie. How are they not filling a need?
But before we answer that question, let's take a step back and define what "filling a need" really means. In abstract terms, it can mean virtually anything. However, in economic terms, it's defined by one thing: the exchange of money.
Whenever someone hands you a dollar for a product or service - that's an indicator of you filling a need. The customer is willing to part with their money in order for you to provide them with value. Therefore, it can be assumed that the more money you make, the more of a need you're filling.
So how do you take that info and determine if you're in the right industry?
Simple.
If you're struggling to make money, then here's a two step process to determine if the industry is a right fit. Ask these questions:
Let's say your goal is to become wealthy. On top of that, you're a musician. You love making music, but are not making money. On the other hand, you have an idea for a dog toy that seems promising, but you don't know if it'd make sense to make dog toys instead of music.
Well, let's take a look at the size of each industry.
Therefore, the pet industry is 4x larger than the music industry. And in relative terms, it provides 4x as much value as creating music does.
On top of that, there's hundreds of thousands, and maybe even a couple million musicians in the U.S. However, there's only a couple hundred thousand dealing with pets.
Thus, not only is the competition lower in the pet industry, but the payout is also 4x higher. So if your goal is to be wealthy, then does it makes sense to play a harder game for 1/4th of the payout? Or does it makes sense to play an easier game and earn a lot more?
tl;dr: Industry size and the ratio of competition to industry size define how difficult or easy it will be for you to make money. If wealth is your primary goal, then get into industries where the odds are stacked in your favor. Sell pet products, not music.
Why?
Because they're not filling a need.
And I know what you're probably thinking: I listen to music, enjoy art, and love a good movie. How are they not filling a need?
But before we answer that question, let's take a step back and define what "filling a need" really means. In abstract terms, it can mean virtually anything. However, in economic terms, it's defined by one thing: the exchange of money.
Whenever someone hands you a dollar for a product or service - that's an indicator of you filling a need. The customer is willing to part with their money in order for you to provide them with value. Therefore, it can be assumed that the more money you make, the more of a need you're filling.
So how do you take that info and determine if you're in the right industry?
Simple.
If you're struggling to make money, then here's a two step process to determine if the industry is a right fit. Ask these questions:
- Does it seems like the odds are stacked against me, or can I control the growth of my business?
- If the odds are stacked against me, then is the market size large enough for me to make a considerable profit? Or is there too much competition relative to the market size?
Let's say your goal is to become wealthy. On top of that, you're a musician. You love making music, but are not making money. On the other hand, you have an idea for a dog toy that seems promising, but you don't know if it'd make sense to make dog toys instead of music.
Well, let's take a look at the size of each industry.
- In 2014, the U.S. Music Industry had revenues of $15.04 billion. (source: http://www.statista.com/topics/1639/music/)
- Same year, the U.S. Pet Industry had revenues of $58.04 billion. (source: http://www.americanpetproducts.org/press_industrytrends.asp)
Therefore, the pet industry is 4x larger than the music industry. And in relative terms, it provides 4x as much value as creating music does.
On top of that, there's hundreds of thousands, and maybe even a couple million musicians in the U.S. However, there's only a couple hundred thousand dealing with pets.
Thus, not only is the competition lower in the pet industry, but the payout is also 4x higher. So if your goal is to be wealthy, then does it makes sense to play a harder game for 1/4th of the payout? Or does it makes sense to play an easier game and earn a lot more?
tl;dr: Industry size and the ratio of competition to industry size define how difficult or easy it will be for you to make money. If wealth is your primary goal, then get into industries where the odds are stacked in your favor. Sell pet products, not music.
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