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The Protocol Economy: A Solopreneur's Playground?

Are we in a “recession” or in a “recovery”? Who cares? What real, practical impact does the state of economy as described by the media and the government have on solopreneurs like you and I?

An op-ed piece by David Brooks on NYTimes.com had me thinking about this. His column, titled “The Protocol Society” talks about the shift in Western economies from the 19th and 20th century focus on making stuff (corn, steel, trucks), to the 21st century basis of the economy: sets of instructions such as software, processes, and intellectual property.

In my opinion, what makes being a solopreneur possible in this day and age is that we can leverage our ideas and skills to create parallel streams of income. This is the distinction between a solopreneur and an artisan: the artisan is a self-employed person who makes things or delivers a personal service, and since only one thing can be produced or service delivered at a time, the earning of an artisan is linear. I’m thinking of some people I’ve coached in the past: a furniture reupholsterer, a plumber, even a dentist. No matter how advanced or specialized is their knowledge, the business model that they’re forced into creates linear income.

But when you take that knowledge or skill and transform it into “protocols” – organized information – then you can move from a linear income to a parallel income. Solopreneurs can leverage ideas and technologies to produce much more value from a time unit of work than if we were building widgets or serving customers on an individual basis.

David Brooks makes a a key distinction between the classic physical goods economy and the new protocol economy: physical things are finite, you can use them up, and therefore responds to the law of supply and demand. But the protocol economy, based on ideas, has no such limit.

What does all this mean for solopreneurs? Here are some ideas that came to me as I considered this concept:

We are individually responsible for creating our own “economy”. In the “Protocol Economy” our personal economic health is ultimately dependent on our willingness to take action and get things done. Because what we offer (ideas, processes, intangibles) is not limited by finite supply or demand, overcoming the inertia of our business is solely dependent on the force of our courage.

Prosperity is directly proportional to the speed of innovation.  To prosper in the “Protocol Economy” you need to be constantly innovating, trying new processes, ideas. Because the world is so complex, if you spend all your time trying to figure out all the variables before you launch, well, you will never launch. The faster you innovate, the faster you find what works. This goes straight to the basic formula for success as a solopreneur: “FIRE”,”AIM”,”FIRE”. Shoot first and then see what you hit. If it’s good, continue aiming there, otherwise abandon it and try something else. The other benefit of speeding up your innovation cycle is that you generate that many more ideas, and since ideas are the fuel of the protocol economy, you will always have something to move forward with.

Money is not essential to create money. In the traditional economy, you need capital to start up, in order to underwrite the means of production and cover the cost of sales. But in the “Protocol Economy” the cost of production is so low that you can make a much better return on your investment of time and money. What is especially interesting is that you can start even before you are clear about the “revenue model”. More and more businesses are going this route (Twitter and Facebook are the highest profile examples). So throw away the rule book that says you need startup capital, bypass the banker and the government subsidy, and start making offers. Sell first, then design, build and deliver. That way you can see if there is any interest in what you have to offer and adjust your processes to meet what people are looking for (connects to the previous point).

The protocol economy is not rational. In the protocol economy, the buyer acts first on emotion then “justifies” with reason. The buying decision is driven by the emotion of desire, since we’re operating higher up on Maslow’s hierarchy of needs (belonging/esteem/self-actualization). Therefore the buyer chooses their provider based on the level of trust (= emotional) and also how the provider can enhance the fulfillment of their desires (referring again to Maslow’s hierarchy).  This means to stop focusing on the features of what you offer and focus on how it helps the purchaser fulfill their desires.

Be the “Top Gun”. The expression “Top Gun” comes from a course I took with Master Coach Bea Fields. When you are perceived as the Top Gun, you become seen as the expert in your field, and you attract more and better clients who appreciate what you have to offer and who are ready to commit. As you become more outstanding, you command a larger and larger sphere of influence, and you get to “cherry pick” clients who are the right fit for you. This demolishes the old “supply and demand” economic model, especially for services (“protocols”). The old models assume equivalent competency between providers (and therefore no differentiation). When you are the “Top Gun” you create your own economy, independent of supply and demand, because clients will beat a path to your door…you are that good!

Success in the protocol economy comes down to one word: “Systems”. Systems differentiate, define and duplicate. First, systems differentiate how I provide my training, coaching and consulting service from a colleague’s similar offering. How I define and execute my systems will give you, as the buyer, a different experience from the other person.  Second, systems define.  If you go to the same restaurant today and next week, you expect a similar result. You also want your order prepared correctly, predictably and with high quality. You can have the most brilliant chef in the back, but if the systems are not in place and properly executed, then the trust is broken and the diner will go elsewhere. Highly reliable and consistent systems take care of all of the little details and free you to build a relationship of trust with your clients, which defines the value they perceive you to provide. Most importantly, well implemented and executed systems take the knowledge and skills out of your head and into the world: this is the key to leveraging your time and creating parallel streams of income, basically duplicating your ability to produce.  Because systems design and execution is so important, this year I will be making it a top priority for my own business as well as the businesses of my clients.

We need to get out of the old way of looking at business – finite markets, supply and demand, competition – and adopt a new way of thinking about what business in the 21st century is all about: innovation, collaboration, connection. The beauty of the “Protocol Economy” is that because success is no longer dependent on the physical resources you possess or control right now, prosperity is within the reach of each one of us – it only depends on our courage to move into action. There is a revolution happening in our economy and our society, and all of the trends point to the next decade being a wonderful playground for bold Solopreneurs.

To me, the closing paragraph of David Brooks’ article sums this shift beautifully: “When the economy was about stuff, economics resembled physics. When it’s about ideas, economics comes to resemble psychology.” Because Solopreneurs are light and agile, we are perfectly positioned to prosper.

In what way does this idea help you create better results in your business? I’d love to discuss this with you. Please share your comments below…

For more information:

Read the original article by David Brooks here: http://www.nytimes.com/2009/12/22/opinion/22brooks.html

David Brooks mentions a book about this idea, “From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and the Lasting Triumph over Scarcity” by Arnold Kling and Nick Schulz
Amazon.com link (no affiliate): http://www.amazon.com/Poverty-Prosperity-Intangible-Liabilities-Scarcity/dp/1594032505

Reason.tv features an interview with Arnold Kling and Nick Schultz:

View directly on YouTube: http://www.youtube.com/watch?v=–QaJ-VEXXU

{ 3 comments… add one }
  • Silvia August 31, 2010, 14:06

    This is great advice. It helps to have someone really simplify things for us and get us motivated and help jump start our creativity! Feel free to visit my site, too!

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