Today I want to talk about Brexit. It’s not a very positive topic, but I believe there are intelligent business lessons we can take away from it, specifically in regards to e-commerce. In this episode, we will be focusing on mistakes we can learn from Brexit for online business owners.
This is something I picked up from Tony Robbins when he said that many of the great investors he knows share similar principles, one of which is asymmetric risk-reward.
How this relates to Brexit:
The lesson we should learn:
Tony Robbins says the quality of our questions affects the quality of our lives and this is a classic example on a huge scale.
The question asked in the referendum was very simplistic. Brexit lumped together multiple complex issues, such as immigration. I would have liked to have seen an informed debate around the topic and various policy areas.
Many political and economic or business problems are full of complex issues.
“I’ve got an Amazon business that has been struggling, should I shut it down or keep going?”
I think that failure was partly on the people who may have voted for Brexit, not realizing the consequences and implications of what it meant.
This is very relevant for e-commerce sellers.
All countries depend on each other these days more than ever.
I was directly affected by this the day before the Brexit vote happened. I was about to place an order in China, and I was looking at a 15% loss in the profit margin. So I canceled the order.
If you’re British, and you’re buying products in China, you’re mostly exchanging pounds for dollars most of the time:
For sellers outside Europe eg based in America, Canada, Australia, South Africa, etc. :
GBP to EUR – selling in Europe If you’re already selling in the UK, whether you’re based in the UK or outside, I’d urge you to sell into Europe.
It may sound like a funny thing to plan for, but if you plan for failure and limit the downside, then you skew the risk-reward in your favor.
The risk is low because you know how to deal with the risk of something going wrong.
Failures in Brexit:
You’re going to be wrong sometimes, and so is your competition. But the person that prepares best for being wrong is the person who lives to fight another day.
I’ve seen this a lot with family own businesses, and when they start fighting with each other.
While you waste your energy on fighting internally, you’ve handed an opportunity to your competition to take some of your market share.
Remember – the financial markets price in the anticipation of future events. So expectations create reality in this world!
This is not the same as unanimity. Everyone doesn’t have to agree.
Not getting consensus leaves the opportunities open to your competition:
This is linked to a failure to plan for failure.
In regards to Brexit:
Not doing rigourous scenario planning.
In regards to Brexit, “Freedom” sounds great -but at what cost?
With basic business thinking, being unrealistic about the upside is a very common mistake.
Negotiation errors are really critical errors in business.
When you set up the negotiation, you need to define the negotiation grounds upfront as much as you can
Make sure you have multiple options.
Don’t expect to get an extraordinary deal if you are in a weak position!
Hey, Hey, welcome back to amazing FBA, this is your host Michael vz, and welcome to the show. So
today I want to talk about the B
word. I’m sorry about that. But we’re going to talk about Brexit for a couple of episodes. Now, it’s not a very positive sounding topic, but I think there’s actually a lot of intelligent things that can be learned from business lessons, in general, specifically for e commerce very much specifically for e commerce. It’s highly affected by political and geopolitical actions, like Brexit, like Trump and his falling out with and sort of coming to terms with the Chinese. We’ll talk about that, in another episode, something I want to get a guest in to talk about.
But this has got to be addressed.
Dealing with reality in an intelligent, calm and not to political and sort of hysterical way, is something that has been singularly lacking from the Brexit debate really, from the get go. And I think it’s high time we address things in a calm, thoughtful way as business people with a business head rather than their political
So I can’t avoid this being somewhat political, because it’s such a political hot potato. And if I offend you, in some way by employing some political views, and I apologize, this is not a political show is not a soapbox for any personal private views on my hold on it. But it is about business. And I think there are certain things that aren’t from a normal business thinking quite obvious. So I’m going to talk about in this episode 10 mistakes we can learn from Brexit for online business owners, and I think some of the lessons are not subtle. So basically, watching what the politicians have been doing with Brexit, and then doing the opposite in our businesses, is probably an excellent way to start. So first thing, one of the things that fantastic investors are obsessed with, as Tony Robbins said in his book, money master the game as he referenced in an interview recently with Tim Ferriss, but I’ve read the book, it’s a great fix, a fantastic book for business, like thinking which I think everyone should read, who invest and every business but person should
think like an investor more as Warren Buffett,
famously, the world’s richest ever invested in the history of mankind, or person kind said that
the better businessman, he becomes a better investor, he becomes an A better investor, he becomes a better businessman. And so if a businessman or businesswoman if you’re a businesswoman,
and there’s a lot in now, that makes sense to me. Now, coming back to the whole investment mindset here, Tony Robbins said, one of the things that the Great Investors that he knows have in common, even though they often have very different approaches in terms of their strategies and tactics, but their principles, often the same. One of the things is asymmetric risk reward. So in other words, you want to make sure that you risk a moderate amount for a potentially massive gain, and that the downside is very limited. And that’s a really critical were thinking that what the Brexit situation involved is David Cameron, as I understand it, and if you’re
American, you may be mystify bold, they said, if you’re British, you may have stronger views the other way. So simplification,
David Cameron was the leader of the Conservative Party, from what I’ve heard was about 2008, 2010
till 2016, when the Brexit vote
went against him. And he had a problem with his his party, that there was a party of I don’t know what 50,000 people, maybe 100,000 people, the political party of ordinary people, not the members of parliament, not the politicians, the ordinary members of his party, and they needed basically, they had very strong views against being in the European Union. And he needed to basically, to put it, simply shut them up, I guess, or at least kind of get a definitive answer from the general public that said to them, we don’t share your view. Now let’s stop, you know, let’s shut this debate down. And so basically, the upside for him was shutting up maybe 10, or 20,000, maybe 50,000, unruly members of a party, maybe a few 10s of thousands of people maximum, right, an internal problem. And the risk was, as far as he was concerned, and anyone who doesn’t that breaks, it’s a great plan, the risk was just causing all sorts of absolute chaos, which has indeed resulted. So for me, one of the absolute classic mistakes that we should learn from is having a very small upside and a massive downside risk. That’s rather like trying to sell really dodgy razor blades or something on Amazon, where you the, you know, the profit you might make is a few cents per unit. And the downside could be that somebody cuts themselves, dies and Sue’s you into oblivion. Obviously, that’s a rather exaggerated and simplistic version, but you get what I’m saying, there are some product choices, some business choices, which have very little upside. And if you really look at it properly, and think about it clearly massive downside risk, that is absolutely absolutely the wrong thing to do. And as you said already before, the Great Investors are obsessed with the opposite of that, so minimizing the downside, so the lowest you’re going to lose, if you’re starting off with a product line is a few hundred dollars, if you or maybe $1,000, or something, if you risks 5000. And you you can liquidate it and sell through at a moderate loss. And the upside potential is that you quadruple the money that’s about you should take every time. So that is the correct way of thinking in my opinion. And that is when the classic things that the politicians got wrong, I think about so
10 to eight years ago when they even
decided to even have a referendum on this question in the first place.
Mistake number two was asking a black and white too simplistic question, but a very
complex issue. And this is something else that was business owners we end up doing so the question that I answered, and anyone else who voted in the referendum in 2016, in Britain was basically do you believe we should be a member of the European Union or leave or or something like that? don’t remember the exact wording of the question. But it’s very, very starkly simplistic. What I would have liked to seen is a bunch of debate around and and informed debate, which has been very lacking, indeed, in the UK, and maybe to some degree in in American politics around the Trump election as well. What I would have liked to seen would be some nuance debate around immigration, what are the
upsides of it? What are the economic necessities of immigration, I would argue that we simply with a low birth rate country like the UK, or in Western Europe, or indeed Japan, which is a whole different kettle of fish, but they’ve had a lot of
and have a very low immigration rate. I don’t know if that’s linked or
not. These are the sorts of things that one would want to get into in great detail,
the social issues led by immigration, etc.
What about the free trade? You know, is it is it such a terrible thing, who benefits who doesn’t certain industries might benefit from Brexit, like fish farmers in Aberdeen or something and others might not? Either export, etc. So I think there was so many intelligent debates that could have been had about all sorts of different policy areas, and possibly we could have voted on various different ones of those. And to lump it all together into simplistic crust question, I believe was the second greatest mistake after using a national referendum was potentially huge consequences as a way of shutting your your own internal debate down. And this is again, my reading on it. I’m not saying I’m right, but this is I’m trying to draw business lessons out of this. So if you are, have a slightly different political persuasion, then don’t get distracted by that trying to think like a business person, right? This is all this is the whole focus of what I’m trying to do drag some business like thinking out of the chaotic parties and tribal nonsense that had been taught around Brexit for the last three years when I had to hear any intelligent conversations about it from politicians. But I do believe that
business like thinking can be applied to everything and indeed must be applied to everything if we want is going to
economically be successful. So the black and white in and out question was, I believe a great mistake. Now, what is the analogy in business? Pretty simple as things like okay, I’ve got an Amazon business that has been struggling for the last you should I just shut it down or so I keep it going? Well, that’s one. That’s a very simplistic, which implies that you only have two options. Actually, you probably have multiple options, you might think that some marketplaces like the USA has proven very problematic because the Trump
taxes as they called, you know, the extra import duty on products from China might have cut some slim profit margin products to zero profit margin or something like that, for example. So you might say, okay, we’re going to keep exploiting these goods from China to Europe, but will shut those down in the US or you might change marketplaces completely, you might just decide that certain product lines are no longer profitable, or certain types of products within those product lines aren’t profitable. Or you might keep the same products and chain supplier, because actually, it’s a quality control issue, or you just need to get the margins a little bit better. But fundamentally, there’s a good market, and so on, and so on, and so on. Normally, when you dig into the detail, you find quite often that you’re going to throw the baby out with the bathwater. If something has sales, but isn’t profitable, maybe you can re engineer your supply chain, such that the profit is there, because they say a profit is made when you buy not when you sell. And I think that’s absolutely true. So therefore, it could be that you have successful marketing side of your business and sales side, but the supply side needs looking at. So just a few off the top of my head examples. But you get the idea. Do not throw the baby out with the bathwater. And that’s an absolutely classic,
classic era in life and in business. And we can
certainly learn from the Brexit thing that just because there are large aspects of about the european union membership that annoyed a lot of people or really angered a lot of people whatever
does not necessarily mean that the opposite is the solution, either. I’m a firm believer and looking in detail of facts and analyzing properly until you find where the real problem is. And it’s normally
somewhere buried in the details. And you need to tease that out, in my experience as a business person. And I just wish that the politicians have had more of an intelligent, nuanced view of life and and we’re more prepared to analyze things I don’t think I’ve heard anybody really analyze this stuff in the political realm. Sadly, and I think a lot of business people who are good people do this automatically, but just don’t fall into that trap. Another classic trap just before we move on from this one
is thinking oh, I’m in a so called boring
product sector that isn’t growing very much. It’s time we went into something random like I know cat food, having sold
scissors for a generation, there’s a person in the tank, a collective doesn’t actually sell scissors, I’m not going to reveal his actual product, of course, but his family’s been in in business for three, four generations selling say scissors. And when you first come into the group, he was very tempted to look into completely random new new lines, I hope we persuaded him collectively that actually know you need to dig deeper into this niche and just be more successful at articulating the value of your scissors and building on the brand that you built, etc. That would have been one massive case of throwing the baby out with the bathwater. So that’s it Mistake number two.
Mistake number three is very interesting one, but I think it’s a
failure to appreciate how global the modern economy is. Now, I think that failure was partly on behalf of the people who are in favor of Brexit, they didn’t realize perhaps what the consequences and the implications of it well,
it doesn’t mean, they should or shouldn’t still, you know, believe in it, I guess.
But I think once again, look properly at the consequences of potential decisions. The This is very, very, very directly relevant to e commerce sell it. So the first thing is supply chains are generally International. So things that are apparently German may cause for example, the Mercedes Benz, quite a lot of their parts are made in places like China, or Japan or wherever and lots of different places, and a certain percentage of them is allowed, and a certain percentage of them is not. So that is part of the country of origin regulations,
which is another thing that the European Union deals with that if
we did have a hard Brexit or indeed do in the future, that will need to be dealt with. Every single product type basically has to have rules around country of origin rules, meaning if 50% of your Mercedes Benz is made in China, but it’s mostly assembled in Germany, and a certain percentage of the the components are German made, then it’s allowed to be called made in Germany, although in fact, that’s the simplification of a very complex situation, just like a great deal of Brexit, right? That’s another error, simplifying to a point of crassness, a very complex situation so
that again, don’t do that and look at the detail the devils in the detail as we know in retail, right, so supply chains across Europe, a very complex, but for most of us as Amazon sellers, or e commerce sellers, we don’t normally source from Europe, if you do, then you’ll certainly need to look at that even if you buy in Britain, this this could be very relevant to a lot of people, particularly if you are selling supplements or things that go on or in the body. So supplements, for example, topical, so skin cream, etc. They may be quotes manufactured in Britain, but a lot of the components may be imported from Europe. Such as you know, the the the raw ingredients might come from Southern Europe or something if there’s olive oil in it, for example, and I don’t sell in that area. So I don’t know any of the details. But
you get the idea, I wouldn’t assume that something is made in Britain is wholly made in Britain, it’s
very unlikely. That’s not how modern supply chains work, which is one reason why
Brexit would be a bigger disaster than a lot of the simple sort of banner
waving people may have thought. The other thing is just more broadly, all countries depend on each other’s these days more than ever, and
we can’t change the world. And this is not a political podcast, this is a business one. But I do think it’s incredibly important to be highly aware of supply chains and the International nature of that and also the regulations that go into that as well.
Mistake number four is very, very linked to that which is again, something that directly impact us as e commerce sellers like overnight impacts, which is to fail to account for the impact of currency exchange rate, with or without actual Brexit of the Brexit decision. So I was directly impacted by this as an Amazon seller the day pretty much the day before the Brexit vote happened for a pound like a by $1 48.
And I was about to place an order in China to ship some goods over to the UK, the pretty much a couple of days, after the Brexit vote with the pound was devalued to $1 33, which is probably approximately where it’s got to, over the last couple of years since since Brexit nearly three years now it’s it’s gone as low as 125 or something 120. When British politicians open your mouth wants to often and and it’s gone up to about the mid 30s. But $1 33 is kind of where it’s stuck. And unfortunately, that rates, that was my profit margin, and that was a 15% fall. And, you know, given maybe I could have made a few percent, but it was too narrow. So I simply cancel that order. And that is a microcosm, I think, a miniature version of what happened across the board and a lot of ways. So
that was a thing of the politicians didn’t really think through possibly the people who supported Brexit, either, that he don’t have to actually go ahead with a should we say an extreme decision, which may have some things in his favor and some things against but it’s extremely I’m not
a I’m a passionate moderate, I think in business as well as other things with meaning. If you look at the details and find a way through the detail, you’ll actually end up with a more nuanced decision at the end of it quite often.
And big, dramatic decisions are often not good business. I mean, there they just aren’t a lot of the times steady as she goes in tweaks and things are often the right way to make it profitable, sustainable business. So that was a failure that Simon I think in as e commerce sellers, we have to think very, very directly about this work whether or not we
so far learned from this decision or simply are affected by it, we need to be highly aware of the relationship to the pound
to other currencies, if you’re based in the UK. And even if you’re based in the US and selling into the UK, that is also true. So I guess this one is primarily for the UK based sellers. But for any American seller selling into you, UK, also very relevant. So the relationship between the pound and the dollar is obviously absolutely critical. And you’re British and you’re buying products in China, you’re basically exchanging them for dollars, most of the time, it was 20 pounds for dollars. So that relationship becomes very critical. It’s mostly not a great relationship at the moment. So hence my story about my order that was cancelled you directly to the Brexit vote and the devaluation of the the pound against the dollar.
So if you’re going to do that, I would strongly advise you if you’re based in Britain to buy products, in changes parents for dollars, and then sell them in dollars in the US. So basically, do not exchange pounds for dollars and then change it back into pounds again, because the future outlet for the parties at the best very uncertain. And, again, the I can’t emphasize enough that the the financial markets do not react to events so much as that anticipation of events. So whether or not Brexit goes, the head of the parent is going to be crushed downwards by the weight of negative expectation by the currency markets for quite some time in my view, and it might bounce back up if it looks like some kind of deal is going to be made.
But that is a problem you have. So if you are British, then the best thing you can do is expose yourself to the dollar economy by in dollars in China selling dollars in USA run $1 account and don’t change anything into pounds, that would be my simple version for you. If you are selling into Europe, as a Brit, at the moment, you’re actually in quite a sweet position because you’re buying products out of pounds, and you’re earning euros. And actually, the European relationship means that you don’t have to sell things if you sell in Germany, which is a slightly bigger market or quite a bit bigger than the UK anyway. And also if you if you’re selling a product, which used to cost them 16 euros, and you’re now selling it for 16 euros, it still looks very good value to the Germans. Whereas to you, it’s now worth quite a bit more because the Euro used to be say one euro for to the power, now it’s one euro tend to the pound,
you’re obviously going to get a big uplift in your income
without changing the prices in as far as Germans are concerned. For example, I say Germans because that is by far the biggest European market, the French and Italian and Spanish market is also available. Occasionally people can make very good profits in those as well, depending on particular types of products in particular markets, for example, watches, I know some people have done very well in Italy, but the simple version is Germany.
So if you are selling in the UK right now, and you’re British base, or if you’re American selling in the UK, only, then I would definitely definitely get selling into Germany as quickly as possible, because that is going to be way easier to make a profit because of the relationship between the currencies, if nothing else, apart from the fact that it’s a bigger, richer country, then UK as well, and is not also facing Brexit. So I guess my response to all this stuff is pretty simple at the big picture
advice. And again, there’s nuances you can get into if you want to have a coaching call with me remember the mastermind we debate this, but
broadly speaking, I would say selling into the USA is a very smart move, all things being equal from the global perspective, exchange, you know, pounds for dollars in China, and then sell into USA in dollars and keep in the dollar economy. And then the other one is, if you’re British or American, you should definitely be looking into Germany as a market. I mean, one person that 10 k collective famously came in after about three months of me bullying him and in late 2017 went into Germany and has since made about 600,000 pounds extra income based on that decision. Now I’m sure that
we are not the sole reason he went in there. But I think like think we would push
the finally got him to do it. So currency exchange rates must be part of your decision making processes. And I think that’s the that’s one of the other massive things about the that they got wrong with the Brexit thinking or that the Brexit has taught us. And we can get right as ecommerce business owners pretty easily. We don’t control what the government’s decide or the people’s votes are or not and what the negotiations are in Europe, we don’t control that. But we can respond intelligently to those events.
So talking negotiators in Europe, and votes and politicians, Mistake number five, that the everything about Brexit screams as a failure as a plan for failure. And it may sound like a funny thing to plan for failure may sound negative, but it isn’t. It is actually again,
going back to the first point I made that mistake taking a massive risk was more game, it’s about getting that asymmetric risk reward the right way around for you. So if you plan
for failure, if you limit the downside, then you reduce you, you skew that risk reward in your favor. So the risk is low. Because you know how to deal with the risk of something going wrong, then you can take a bigger punt on a big upside, because you know how to handle the downside, right?
So you’re not going to be right all the time. And that’s another thing that Tony Robbins said in his book money master the game
that the great guys know they’re going to be wrong, they’re serious investors know they’re going to be wrong. So that’s why they’ve skew things. They look for big rewards. And they always look for how what is the downside? How would I handle that? How can I minimize that? So the failures in the Brexit? How where do we start so many, the little work done by the government to prepare for a lead vote in 2016, the government at that time, just acted as if they were
definitely going to win the vote IE they wanted the government of the day wanted Britain to remain in the European Union. And
they basically didn’t make any plans for what would happen if they lost the vote. And that I felt was very irresponsible on whichever side of the bait you sit on. I think you’ve got a plan for losing what you you want to do. And the government of the day was planning to remain but that the polls were giving pretty strong hint that there was a very strong possibility of a leave vote as indeed happened. And they hadn’t set up government departments to deal with it. They hadn’t got civil service scenario planning ahead and started trying out lawyers and and trained negotiators because of course, Britain hasn’t needed their own trained negotiators for 45 years
of the membership of the European Union, which pretty much exactly my age, I was born in the European Union and have never left
it really well. Occasional trips outside it. But that that’s how old it is. So that is how long it’s been since they’ve needed to train people. So none of that happened. And that’s a classic mistake that we do not need to follow. And even the high risk type entrepreneurs ironically, including Trump, who
as a politician, I guess a lot of us find it quite interesting. Should we say let’s let’s leave it at that.
But as a business person had some things going for him and another famous person, Branson, they’re both famous risk takers. But actually, when you analyze what they really did, they would cover the downside in meticulous detail and have teams of people preparing for If this happens, then this and if this happens, what could happen? How do we protect against it? For example, when when Richard Branson setup Virgin Airlines, which is obviously it famously high risk industry where it has, its it’s been the death of so many business hopes over the decades, but he went to Boeing and negotiated a deal with him whereby if things didn’t work out, he could return the planes. How smart is that? So he limited the downside, he planned for things not working. And then of course, he went and worked very, very hard to make certain things did work. And of course, it’s taken off and being and another one of his billion pound companies, huge success, but he knew that he could be wrong. And rather than just hoping he plan so as they say, in the Marines, hope is not a strategy. So plan, you know, prepare, plan for the best prepare for the worst is what they say or something like that. And that’s such basic smart business strategy. And this is a marathon marathon, not a sprint. So you have to
prepare for the fact that you are going to
survive when others fall. By doing that you’re going to be wrong sometimes. So are your competition. But the prepares best for being wrong is the person who lives to fight another day, and the person who doesn’t is goes down. And that is how you went over your rivals long term. A lot of the time, I know you have to face the same challenges and the same upside potential but you’ve prepared for the downside, and they haven’t.
Another one around that is really poor plans by current politician for no deal leave. I mean, it seems like only in the last two, three months is any kind of guidance come from central government, and in different Amazon around the no deal scenario, which is now looking more realistic. But I, I was talking to people I look a bit to my own trumpet. But June 2018, I went to Conference of the pan, they ran up in Manchester. And I basically laid out what I thought were the best ways to deal with a no deal. possibility. I said, Look, I don’t know if it’s that possible. But
it certainly it certainly is possible.
Don’t have it’s probable, I should say, but it’s certainly possible. So
get yourself prepared.
And basically my I’m not a magician, around, you know, changing how the whole globe works or UK government policy. But I said, Look, it’s obvious that you should be diversifying away from the UK as a simple way of dealing with it, particularly if you’re in the early stages of developing a business. But even if you have an existing business, we talked about one of the tanker collective members very strongly based around UK sales, but went into Germany, that’s now a hedge against
Brexit to some degree. Now,
we are beginning to get a bit more guidance from central government and Amazon as well around how to prepare for potential no deal. There was obviously a big flurry of finally making some efforts in that way, just literally weeks before the potential cliff edge of I think it was the 31st of March, and then it was the 12th of April. We’ve now obviously recently heard that we’ve got until the 31st of October before Brexit would definitely go ahead and that and who knows whether there might be another extension and what will happen to that. But I do think that the failure is a plan for a new deal. Brexit was, is a huge, huge problem with the government. And that does not need to be the problem for us ecommerce entrepreneurs, we can plan for it. If it doesn’t happen, fantastic. We’ve done scenario planning, we’ve made our business probably more robust, more diversified. That does happen. Again, the person who plans for that downside, in this case, not a failure of your own business, but a failure of international commerce and and treaties that international public international relations break down, then you can plan for that, and you’re surviving the people who don’t
So again, it’s just smart business.
can’t emphasize enough about all this stuff.
Politics is one of those complicated areas. I think most big business figures in the UK seem to be massively in favor of remain. I know there are some famous business figures, some of whom are quite impressive people who were equally in favor of Brexit. So I’m not trying to come down on one side of the debate or that, but I just think we just need to apply businesslike thinking. And above all, let’s learn from the non business is like thinking of the Brexit and whole scenario which has been I think everyone would agree whether you’re the most fervent remain or most fervent Brexit here that, that it has not been handled well how the politicians, so lots of lessons to learn by doing the opposite. So let’s continue with this. So we are
out to number seven.
Sorry, number six, which is kind of linked to number seven. Number six is obsessive with infighting within the country, and or even the party and not thinking about External Relations. This is huge. I mean, both the major political parties in the UK that the Tories or the conservatives and the labor have, it seems to me I’m and I’m not in favor of any of the agent political parties here. So this is not going to get, you know, party, political in the sense of, I’m not partisan about this, I think they’re all idiots To be honest, or at least maybe they’re intelligent people deal with a difficult situation, who knows, but they’re certainly not being business like, I mean, that happens in companies as well. I mean, when they start the board, in particularly family owned businesses, the board starts fighting with each other. And then they just spend all their energy fighting each other in it and not really being aware of the outside world, and you just handed opportunity on a plate
to your competition. So in case of UK, for example.
And manual McCall, the French
president is located from Paris and practically licking his lips at all the wonderful businesses coming to Paris,
from the City of London, the City of London may have in negotiations go a certain way end up
keeping its passports to be able to sell financial goods to Europe, but or financial services. But guess what, it’s so much uncertainty that a lot of the bigger institutions are moving people from London to Paris, or to Frankfurt in Germany and the Germans being a little bit more low key are quietly you know, really also very happy about that. Now
start in fighting with your cousin or family or your business partner and your Amazon business, and meanwhile, there’s a bunch of Chinese suppliers out there
happily selling into your market, you are basically handing it to them on a plate. So why you waste your energy on it fighting everybody internally, then you know what
your competition is just going to take your market share. And and that happens on an international scale, like I’ve just described with the financial services
industry in the UK, which is just being handed to the the French, particularly Paris and the Germans, particularly in Frankfurt on a plate, but it’s just a disastrous use of energy. So if you have disagreements,
internally, you just have to get on with resolving them in some
intelligent way. Which really brings me to the the second
point around this. So Mistake number seven is failure to get consensus,
which is not the same as unanimity. Everyone doesn’t have to agree
that everyone is right, and everything’s perfect, or that everyone gets exactly what they want. You just need to come to an agreement, I agree position as a country, or in the case of business as a business. And the bigger your business gets, the more critical the skill is going to get. Because if you have a team of people, and they start, you know, leaving or falling out with you, or you have it only takes two business partners have a massive argument. If you can’t come to consensus, then you don’t have a position as a as a company. And your rivals do again, you are handing it out into the competition on a plate says it pretty much related to the infighting thing, I think the only difference between those two is really the infighting is
is about focusing your energy internally in a very destructive way. As opposed to dealing with things internally as elegant as you can and facing outwards and look at the market. What do your customers need? Well, it’s a competition up to that you need to beat and fairly to get consensus is really about not producing a strong position of your own that is clear to you. The market knows what you stand for. And your competition knows you know that you are out there and tough tough to beat.
Failure number eight or Mistake Number eight is being unrealistic about the downside, which is
a little bit about the same thing as taking a massive risk for small gain, really, but I think it’s it’s about
the, again, it’s a little bit linked with failing to plan for failure.
I don’t think that
anybody really in this country took the downside potential. seriously enough of Brexit. I mean, I think the the currency change alone has cost the British economy millions, if not billions of pounds, and also is made life very difficult for people like myself, little e commerce entrepreneurs who are bringing GDP and taxable income for their tiny companies. You know, there’s a micro businesses to the UK exchequer. I mean, really, that’s already had an impact. And that wasn’t something I think that anyone thought through. And again, not doing rigorous scenario planning. So you can predict the future instead of recognizing you won’t be able to. So yeah, let me let me rephrase that.
Not doing rigorous scenario planning. If you assume you have to predict the future, that’s obviously impossible. And a lot of people at that point say, Oh, well, I don’t know what’s going to happen with Brexit. Who knows? We’ll just have to wait. See? Now I don’t think that’s actually good business thinking what you should be saying is, yes, I am humble enough to know that I cannot predict the future. What is the probability of a no deal Brexit? I don’t know. Although there is certainly there were some bets on recently placed with Betfair there was 50%. Now how accurate those bets? Well, I don’t know. But it gives you a bit of a flavor. So okay, how likely is it? I don’t know exactly what percentage is it? I can’t tell you. Is it a distinct possibility? Yes. Therefore, you don’t need to predict what percentage probability it is unless you’re going to place a bet. But you should prepare for the LIkely possible futures. So no deal Brexit, staying in the customers union, but outside that things have been negotiated deal. And a nodal Brexit so that those are the remaining in the custom Jeannie and I should say, so remaining, remember the EU some kind of big deal in the middle of all the way to a no deal Brexit. And those are scenarios you should plan for, in my opinion. And it’s not really that hard to plan for them. But even doubt you should do the classic investors. safety thing, which is diversification, asset allocation across a spread of different types of assets, is the classic intelligent investors response to knowing that you’re going to be wrong about predicting the future at some point. So you diversify as a hedge against that. And I would say for e commerce entrepreneurs, especially on Amazon, it’s very obvious what that is, if you sell in the UK and and he diversified to Europe, and it possible, America, and you should also consider Japan, if you’ve got a working product already, very likely it’s going to work Japan is pretty much the same exact size as UK, Amazon, it’s a tiny bit bigger. It’s actually the second biggest story of the third base. I was a marketplace after Germany now to UK is forth. And I think quite likely if things continue along current trends to to to remain that place because of all the issues brought around by the Brexit uncertainty. So yeah, being unrealistic about the downside, I guess that’s kind of linked to some of the other mistakes as well.
The mistake number nine is again, linked to this first point of risk reward, which is such a fundamental way of thinking in a businesslike way. A mistake number nine is being unrealistic, realistic about the
upside. And I think this has to be placed at the feet of the Brexit.
Sort of the people pushing breaks it down back in the day before the referendum freedom was what they’re pushing for. And I understand the attractiveness of that. And and I understand also that there are multiple issues with being part of a
of a union such as the European Union.
But what is the cost of this? And what is the genuine upside I think there was a lot of talk in the earlier days of the the since the Brexit vote, when people talking about making deals with Australia and New Zealand and and other such exciting sounding things. But
if you’re going to replace,
for example, Germany takes approximately
a third or possibly a bit more of all British export.
So we’re going to replace that. You can’t really, realistically do that by selling to a country on the opposite side of the world with a population of a few million. That is unlikely to happen. So the upside potential i thought was very oversold.
Who knows I cannot predict the future. Will Britain actually be better off in 1015 years time out of the European will it leave? I don’t know I can’t predict the future. But I do know that a basic business thinking being unrealistic about the upside is a very common mistake. I see this all the time with Amazon sellers that people who are new to the markets just overestimate for example, the price they can sell something for. And that just simply means their profit margins look way fatter, more attractive than actually end up being. And that’s because they have no particularly good strong differentiation point. They just somehow hope that by having good photographs, and writing good copy and working with a good coach, they will magically be able to charge more than the average in the market for a similar type of products. And yes, that might have been true back in 2013 and 2014 when I started out, but it certainly doesn’t seem to be true now in the vast vast majority of markets very unusual. So I try and be very realistic about people by the belt that by the way when I coach people. But it’s that’s a classic mistake that I see a lot. And that’s a very own business like were thinking. If you protect the downside, and you reduce, for example, when it comes to profit and loss, if you protect the downside, that’s under your control a lot of the time. And that means that if things are better than you thought, you win, but even if they aren’t, but a new thought you still win. So for example, with profit and loss, instead of being overly optimistic about the price you can sell something for, why don’t you work on very, very, very hard on negotiating down or changing suppliers, or simplifying the design of your product such that you reduce the cost side of the profit and loss equation. And then you don’t have to hope that you can sell your product for a higher price. And if that turns out to be true, that’s a bonus. But it’s not what you’re depending on. So I think this is really critical. And this is very very businesslike thinking to be realistic about the upside potential and, and very often business
like thinking to be down unrealistic about it. So which is another one of the sort of
characteristics of everything about the Brexit debate and the extremes of the lever, the next tier side or the remainders just seemed to me to be just overselling that position, as opposed to just being realistic about what is the upside of remaining in the European Union, it’s not going to solve everyone’s problems. What’s the upside of of exiting the European Union, you’re still gonna have regulation and red tape. And a lot of things you don’t want, and those are part of life. So I think that’s that’s a critical lesson as well for business people. And lastly, the 10th mistake is a couple of classic negotiation errors, which are really critical areas. In business as well. The first thing is that
I felt that the British government allowed the European Union to
set negotiation parameters pretty early on. Now, maybe that was always going to happen, because there was a bit of a massive imbalance. But as the Greek finance minister pointed out, sometimes Goliath can be beaten by David, if there was really Kenny, I don’t think they work. How do they allow the European Union to set the parameters and negotiation on I’m sure that all the any Brexit here listening to the stereo? Yes,
yes, we were betrayed by our government, maybe maybe not. I’m not going to get into that. But what I would say is, it’s very important when you
set up a negotiation that you define the game as much as you can, so that you run for your opponent that you actually define the land on which you’re going to have that debate. And you make sure you define the land being stuff where you have a strength. Now, I have no immediate need business analogy for this. But I guess when you’re talking to suppliers,
don’t let them start dictating that this minimum order quantity is a given. And then if you’re going to do that, you start then negotiating over the, you know, the price or something, just make sure that you have multiple options. I mean, the problem that Britain had to negotiating with the European Union, it didn’t have lots of other options, it couldn’t say, we’re going to go and join the North American trading block with our friend, Mr. Trump, unless you you give us a better deal. Because that isn’t on the table. And it never was. Whereas we as as
sellers have a
huge number of suppliers we can speak to so you should never ever be beholden to one supplier, because there’s always another supplier, he’ll be happy to take your business. So you should always negotiate from a position of strength, you should always have a second option. Which brings me to mistake number two, that I think we can learn from Brexit, which is unrealistic negotiation expectations, I think there’s been an awful lot of hot air coming from British politicians for stuff that maybe if they’re, you know, some of them are obviously intelligent people, but act like it, they’re not intelligent. Sometimes I guess that’s what happens with politicians, right. But I think if you set ridiculous negotiation expectations, then you’re going to be very disappointed. Obviously, if you don’t have a plan B, which is what we’re just talking about, absolutely critical in negotiations of whatever kind, if you’re trying to get, you know, if you’re dating several people, and you want to get somebody to treat you like a princess, then if you are dating several people and the person you want to be with but you want them to treat you better knows this, they have an incentive to do it. If you are trying to negotiate a better price with your Chinese suppliers and Amazon seller, or an e commerce seller of any kind, then they know you have a plan B and Plan C
and that they are viable and they could quality products, then you are in a strong position. If you don’t, you’re in a weak position. It’s as simple as that. And I think that the the Britain, British government as a whole and all the British politicians, I’m not just one party or the other, just had really unrealistic expectations about what was negotiable with the European Union. Given that the Britain does not have a plan B, there is no other trading block that we can say wave under their noses and say, Look, America is offering us freedom of setting our fishery laws, for example, agriculture,
which is one of the famous the unpopular, set to regulation from the European Union, we’re going to join them unless you change the fishery deal. If that would this situation, I think Britain would be in a strong position to probably negotiate a lot of things. Unfortunate, it’s not really that position. And what they have possibly recognized, or at least in the heart of hearts, a lot of people know, but aren’t willing to admit publicly that the European Union cannot be seen to be soft on one member leaving because probably loads of other people would want to leave as well. If you asked a question to the French or the Italians, do you like the government? That almost certainly going to say no. And if however you phrase it, if you give them a chance to take a punch at the you know, to caucus nuke at the government or trying to phrase they probably will. But that doesn’t necessarily mean it’s the right question to ask. So again, asking the wrong questions. As we said, Mistake number two, really is a terrible thing asking the right questions. As Tony Robbins famous, he has said his whole career ask a better question get a better answer. So realistic negotiation expectations are important. If you are a very small salary, and you go into a Chinese factory, and you want to get yourself a huge price reduction based on no relationship and a very minimal order, you know, minimum order quantity of it couple of grand or something,
then you’re unlikely to get a massive reduction and that if your profit and loss projections depend on that you’re going in with an unrealistic expectation. Instead, go in, set the ground for negotiations in your favor as much as you can. And once you’ve done that be realistic. I mean, once you develop into a bigger power, bigger force, you can get incredible deals from people. I mean, there’s, again, coming back to e commerce to finish up so we leave the Brexit mess behind us, we learn the lessons from it, and then park that way of thinking, and that obsession and get back to being really proper business people. If you aren’t negotiating with supplier, and you become a very significant source of money for them. Because you order a lot of stuff from you will get treated like royalty, literally and one of the members of the 10 k collective, were showing recently Well, let’s face it bragging but you know, it was a good share, that he is a member of his team.
His Board of Directors went to China to go to a factory where they’d they’d they’d quadrupled their orders. And they were obviously significant percentage of this factors revenue because they got there, they literally they looked out the window having been talking about the phones, and we’re amazed to see a red carpet literally and the entire factory lined up either side of the red carpet to greet them, like they were worth visiting celebrities or royalty. So that’s an example of when you really form a deep relationship, you can get some incredible things happening. And that is kind of the opposite to the entire Brexit mass, which is instead of looking for divisions and trying to negotiate on the base of antagonism look for wins, where it’s a win win for both sides. And
really, you can create wonderful things when you collaborate and cooperate. So these are some of the lessons I would say from Brexit, the mistakes, the 10 mistakes that I can see, there are many of them but a flavor 10 mistakes from Brexit that we can learn from and do pretty much the opposite as business owners. Thanks very much for listening to you in the next podcast.