30/07/2018
Pause: The trader from Dubai
__What is your business model?
There is a hilarious story I was told by a friend of mine from Dubai which I want to share with you. In the days when Dubai was just a simple trading post, there were two brothers. The older of the brothers had been a very strict incorruptible customs official all his life.
The younger brother was a free-wheeling and sometimes corrupt businessman trader who wandered around the Middle East buying and selling contraband.
It so turned out that one day the older brother was assigned to manage a border post, and low and behold he saw his brother arriving with 20 camels, each loaded to the hilt with merchandise.
“My crook!" the older brother told his officials. “I will show him no mercy if you catch him with contraband. I want you to search those camels and confiscate anything being smuggled.”
For hours the brother’s camel train was searched and they surprisingly found that everything was perfectly in order!
The brother was allowed to go through.
The following month, the brother returned and went through the same ordeal as the officials tried to catch him for smuggling. It went on for years, with the younger brother always able to show proof that he had not smuggled anything. Meanwhile he just got richer and richer.
The older brother was promoted in his own job, and eventually retired from the civil service with total honor. His brother got richer and more powerful, and eventually their relationship improved somewhat.
It came time for the elder brother to die, and he called his younger brother to his death bed.
“Let me die in peace, my brother. I need to know the truth from you. I know you are an unrepentant scoundrel, though you are my brother. I’m now retired and there is no harm I can do to you. Just tell me the truth..."
"What were you smuggling?”
“Camels,” the brother replied.
Lesson:
The lesson for the entrepreneur is not to emulate the scoundrel brother (!) but rather to learn to understand the business someone is engaged in, and how that business makes money.
Now and again, I have urged entrepreneurs to try and understand how certain business models work. If I ask you how do businesses like WhatsApp, Twitter and Google actually make money, most people would glibly say “advertising.”
And as I have said before, that answer is insufficient to earn you a “pass,” and more importantly, you would not be able to start a business using such models, because you simply don’t know enough. The consumer-minded says, “I really don’t care, as long as it’s as cheap as possible, and works well.”
Meanwhile these huge businesses like Google -- which is worth much more than the economy of Nigeria -- just get bigger and bigger!
We need entrepreneurs who can really study business models and understand how they make their money, to the extent that if they were asked to replicate them, it could be done successfully.
Believe it or not, there are also a lot of entrepreneurs who make money in a business they don’t really understand. That, too, is possible! (But rarely sustainable!)
There are also a lot of very honest civil servants just like the older brother. Unfortunately, some of them have the same mindset... They really don’t appreciate or sometimes even understand the businesses they are trying to make policy on.
Sometimes you can’t help them because they are completely convinced in their own minds that they know everything they need to know. Other times, I am sure they appreciate when you can point them in the direction of good credible information. As I have written here before, technology is changing our world very fast...
The global economy is increasingly being dominated by companies with a scale and capacity that has no historical equivalent. They trade in goods and services whose complexity and business models are ever more complicated.
Here's just one link for those of you who want to know more about "business models." Remember though, I can't do your homework for you! https://hbr.org/2015/01/what-is-a-business-model
It is not a laughing matter when both entrepreneurs and policymakers in our countries have only a superficial understanding of what is really going on. Some of us are happy to shout our lungs out on Twitter and Facebook with little thought as to how they make money—from us!
How about business models where we from what they do instead? Surely by now you are thinking and working hard on that, senior class!
End.
