Yesterday I listened to an episode of the James Altucher Podcast with FUBU founder and Shark Tank star Daymond John. It was awesome.
John talked about his new book, “The Power of Broke”. What a great title. The subtitle is, “How empty pockets, a tight budget, and a hunger for success can become your greatest competitive advantage.” The concept is as straightforward as it sounds. Being broke is an advantage in many ways. The power of broke is the power you harness because you have to. It’s the creativity you employ when you can’t buy your way to the next step.
I’ve written before about the advantages of being broke (with a much lamer title, “Your Lack of Income Can Be An Asset“). While I focused on the freedom and flexibility to experiment and the low cost of failure, John talked in the podcast more about the clearer decision making and enhanced hustle when options are constrained.
One particularly poignant example was when he was selling hats on the streets of Queens. LL Cool J would come to the neighborhood frequently, and John would stalk and harass and beg him to wear his hats. He finally did, and it resulted in an explosion in demand. John said if he had $500,000 to spend at that time he would have spent it all…on getting LL Cool J to wear his hats. Because he didn’t have the money, he found a way to do it without.
One of my all-time favorite TED talks is called “Embrace the Shake“. It’s about how creativity can often be unleashed if you give yourself constraints. An artist who lost his ability to do his favorite technique was forced to find other ways. He eventually began a series of experiments in creating art with ridiculously tight constraints. He could only use paper cups and ink, for example. The results were as much about what it did to his mindset as about the art he produced.
If you launch a startup with no money, you’ll figure out how to move forward with no money. If you raise $1 million in venture capital, you’ll figure out how to move forward spending $1 million. The activities you engage in may even be the same. Or worse, the money blinds you to problems with your model or assumptions and creates a lag in the feedback loop. Test small and quick, fail small and quick. Money often makes that harder.
This is obviously not about any kind of moral superiority to poverty. It’s not about pretending fewer resources always provide an advantage over more. It’s about a powerful mindset shift that occurs when incentives and desires are tightly connected. When you don’t have a backup plan or the ability to give up after the first setback or buy your way into the next step, you have something most of your larger, better funded competitors don’t. You have the power of broke.
Since it’s a mindset, you can employ it even if you are rich, but it’s definitely harder. Take advantage of the time you have now as a young upstart and get every drop out of the power of broke.