“Dropshipping” is one of the most used and abused terms in Digital Nomad circles.
It refers to the practice of selling items without keeping inventory on hand, relying instead on a third-party manufacturer to ship the items directly to the customer.
The term recently reached a much broader audience through a widely-shared piece in ‘Wired’ magazine by Sirin Kale titled “‘It’s bullshit’: Inside the weird, get-rich-quick world of dropshipping”.
On today’s podcast, Dan and Ian weigh in with some of their own thoughts about the article, whether dropshipping can be used to create long-term success, and the pros and cons of the business model itself.
Listen to this week’s show and learn:
- Why the Wired article caused so much controversy among entrepreneurs. (4:50)
- What a dropshipping business looks like in practice. (14:17)
- Why the practitioner to preacher ratio of dropshippers raises a lot of questions. (19:02)
- Whether it’s possible to buy your way into entrepreneurship. (33:15)
- How dropshipping can lead to potential long-term success. (38:23)
Mentioned in the episode:
Before the Exit – Our New Book
Partner With Us
The Dynamite Circle
Tropical MBA on YouTubeSirin Kale
‘It’s bullshit’: Inside the weird, get-rich-quick world of dropshipping
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Dan & Ian
Ian: When I read it, I was thinking, ‘Okay, I understand the picture that’s trying to be portrayed here, but this isn’t the real opportunity. If you want to be an entrepreneur, if you want to be successful, this isn’t the real opportunity, this is the jumping-off point’.
Dan: Yeah buddy, welcome back to the TMBA podcast. I’m here as always with the Bossman, give me a shout out.
Ian: Hey, yo.
Dan: Welcome to the pod shop. We’re on lockdown day ‘w……’.
Ian We should have started a little tally somewhere and etched it into the side of the building.
Dan: Chalk marks in the cell. It’s funny, I found myself on YouTube the other day listening to an eloquent POW talk about six years in lock down. There are a lot of humans out there that did some amazing things with their lives and what I did was tried to trade out some potato chips for hummus and watched Netflix for seven weeks.
Ian: Yeah you’re locked down in the air conditioning. It’s been awful.
Dan: Well shout out. We hope you all are healthy and safe out there. And today’s goal is to bring you a little bit of inspiration, fun, hopefully take that next step in your business. The reality is this. Now’s the time to make changes to get set up for the future to ride this wave out of what’s going to be a recession here. And businesses that are designed well, that have the right cost structure, and that you can get a sustainable amount of effort into that thing as we come out of this recession over the coming half a decade or whatever, you can ride that wave up.
Ian: Some people are saying this is the ‘buy’ opportunity of a lifetime. And got to say, I kind of agree with that.
Dan: Yeah, do you even have to say ‘kinda’ at this point, why don’t you ‘guru-ise’ your statement? Come on, ‘kinda’? It’s got to be right.
Ian: I’m not that confident about anything, honestly. But historically speaking, this is the time where you can make hay if you have enough powder to buy low.
Dan: And it’s not only a ‘buy’ opportunity of a generation, but also a build and build and buy are closely related in the sense that in order to build things you essentially, you’re either using your time or you’re buying assets through labour, through real estate, whether you’re gonna have an office or whether you’re gonna be buying inventory or whatever, all these things are at an all time low. So if you’re looking to build or buy right now is your opportunity and this is your podcast.
Dan: Alright, so I’m just gonna swoop in here with voiceover to set up an article that planted the seed for this episode and we hope you all enjoy this one. Let us know what you think. This is way more casual. It’s like a discussion that Ian and I would have over a beer here at the ranchette. I don’t know, maybe there’s not clear takeaways here but I hope you find the conversation enjoyable.
So in this episode, we’re going to give our thoughts on one of the most used and abused terms when it comes to online business circles. Can we drop some sound effects, please? Wait for it.
Dan: Dropshipping. I suspect many of you listening will have read this piece that’s recently been doing a lot of rounds on Twitter because it’s both amused and enraged a lot of people interested in making money online. It first appeared in ‘Wired’ magazine and it’s title is “‘It’s bullshit’ Inside the weird, get rich quick world of dropshipping”. And just for clarity, the ‘It’s bullshit’ part is a quote from an interviewee.
So the author is Sirin Kale shout out. She’s a really fantastic writer, part of the reason so many of us are talking about this piece, although of course, I personally feel it wasn’t a complete picture of dropshipping it was interesting nonetheless. The piece focuses on some I would say ‘very interesting’ people that she met in Bali. So Ian and I will give our thoughts in a minute, but if you want to check out both the article and Sirin’s bio for yourself, they are in the show notes. So that’s the context. Let’s get on with the show.
Dan: What we want to talk about today is information about entrepreneurship. And we’re gonna talk about which critiques we feel are valid about dropshipping or any business model for that matter and which are invalid and have an agenda behind them.
Before we do that, I want to point out a cool effect, which has stuck with me ever since I first heard about it. I heard about it from Taylor Pearson, who’s a regular guest on the show. It’s called the ‘Gell-Mann Amnesia effect’ and was coined by Michael Crighton, all time great author, and writes movies and books and stuff.
Michael writes, ‘You open a newspaper’, and this is about the ‘Gell-Mann Amnesia’ effect, ‘You open up the newspaper to an article on a certain subject you know well. In my friend’s case, that’s physics in mine, it’s show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often the article is so wrong that it actually represents the story backward, reversing cause and effect. I call these ‘wet streets cause rain’ stories, papers full of them. In any case, you read with exasperation or amusement at the multiple errors in the story, and then you turn the page to national or international affairs and read the rest of the newspaper as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page and forget what you know’.
Again, that’s the ‘Gell-Mann Amnesia’ effect. I love this because it’s just such a rare thing in life that you’re covered in the media. Or something that you know about intimately is covered in the media but it’s so common for you to be exposed to media. So in some ways, we’re not really prepared. Well, Michael Crighton is a very smart guy and he’s saying, he has this amnesia every day. And I do too. I remember back in 1999, I begged my parents with a long form sales letter to let me go to Woodstock 99. And I remember my mom by the time she got to the end of the letter she was basically like, ‘I guess I can’t say no now, because you basically countered all objections’.
Ian: That sounds like you.
Dan: It’s my first copywriting success. So I went to Woodstock 99, which was famous for its lack of organisation and also the wonderful talent that was on display there. And I remember reading the newspaper articles about what happened there afterwards. And I thought to myself, were these people even there? I had all these questions, and it just didn’t seem accurate. It was representing a world that I didn’t inhabit necessarily.
And that was really the first time I’d ever done anything that had been in the media. And since that time, I’ve seen a lot of articles like this in ‘Wired’ about entrepreneurship. And now you see, you know, citizen journalists, blogs and stuff like that. And it is interesting to just sort of figure out, how do we evaluate these things? What do we take away from them? And then how can we importantly put it to use in our business?
Ian: That last thing is what I’m most interested in Dan, which is how do we put it to use in our business? When I read these articles, and in any articles, you got to ask yourself these days especially, what is the motivation of the person writing this piece? Where are they coming from? And we’ve talked about the way media companies are run now. The Washington Post is owned by Jeff Bezos, one of the richest men in this world. Fox News is owned by a multi billionaire. Yeah. American media is owned by corporations in a lot of ways.
Dan: To borrow a term from an American news agency ‘fair and balanced’. The problem is writing these pieces. What this author did flying to Bali interviewing all these people. She’s an excellent writer crafting the words telling the stories. The real question is, well, what’s your downstream incentive? And I think, part of what the themes of this show has always been, when we come back and share the stories of the entrepreneurial events that we’ve been to, the people that we met on the field, the people who’ve quietly emailed us and said, ‘Hey, guys, thanks for what you’re doing. Please don’t mention what I’m doing on the show. Because the reality is, I don’t want thousands of really smart, competent money, people knowing how I make a living’.
Ian: And this is also the reason Dan, I think probably The first five years of our podcast, we didn’t disclose our niche because we were disincentivized to do so.
Dan: And I know a lot of people would roll their eyes and say, ‘Oh, that’s overly protective’. The reality is, I think that tide is shifting a little bit because the internet does provide these serendipitous opportunities. So for example, if you reveal yourself as having a certain kind of business online at 10s of thousands of listeners listen to this podcast, and now you might get investors or friends or partners or employees, whereas those opportunities didn’t quite exist as much five years ago, that kind of serendipitous, everybody’s connected in those ways. I don’t think there’s this big, big risk of people going out and modelling your business necessarily, or really taking what you’ve learned. But the reality is – since there’s no upside, or it just takes a lot of effort to share. So it’s like, ‘can’t be bothered’. Most people would rather be anonymous and rich. Why share these things.
And I bring this all up to say that the very small percentage of people that make money in a TropicalMBA style, less than 1% of those people share their journey online. And so what you have is this really, really imbalanced structure of how people how people gather information, what they share and when they share it. And so the reality is when some young writer who’s really ambitious, is going to fly to Bali, their goal is to get people talking about it, and to get people reading the article, and so kudos to her that’s what we’re doing right now. But to suggest that this is somehow deeply evaluative of what expats in Bali are doing, or how people are making a living. I mean, that’s just not the aim here.
So, I don’t blame her for that at all. I mean, that’s not her job. Although I do understand why a lot of people in our community get triggered by this, including myself, there’s a part of me that feels when someone comes in and turns your life into a product like that, and you don’t have control of it, you feel a little violated by it.
I could imagine a similar story about digital nomads or location independent people or podcasts with palm trees on the title and thinking, ‘You know, they got one view and they’re gonna sell it the way they want to sell it and it is what it is to them and it just makes you feel like man, a little bit vulnerable’.
Ian: I think you were much more affected by this article than I was. I read this article and I thought more about the business side of things. I thought more about, ‘Well, how can these people be successful? Or how are they successful? Or should people model this?’ ‘Should people actually get into dropshipping?’ It’s something that I’ve talked about for a long time, which is I wouldn’t get into dropshipping or if I got into dropshipping it would be a means to an end to develop new products.
So when I read it, I was thinking, ‘Okay, I understand the picture that’s trying to be portrayed here, but this isn’t the real opportunity. If you want to be an entrepreneur, if you want to be successful, this isn’t the real opportunity, this is the jumping off point’. So for me, it was less about the lifestyle and more about the business opportunity.
Dan: Well, I’m not reacting to the lifestyle. I’m reacting to the way information works. We’re information brokers. And so that’s how this affected me which is: people are talking about it. And so it’s like, ‘How do ideas affect people and how do they work? What is the difference between idea and reality?’
Ian: Dan, for years, years, years, years, as long as we’ve been doing this podcast, we’ve gotten some hate mail from people. ‘You guys are just coconut cowboys riding around the world. This is a dream, this is irresponsible people should still be going to college. There’s no way that this is gonna last’. And for years we’ve kind of said, ‘No, we see something that you don’t see, we see an opportunity.’
Dan: We know these people.
Ian: We know these people, we talk with them directly. And that’s just it, we’re inside of a community that understands things that other people don’t. And sometimes people write articles from the outside and they do not understand all the pieces of the puzzle and how they fit together, which is going back to Michael Crighton, which is: seeing wet streets and writing a story about rain.
Dan: So let’s, let’s then break down specifically why there’s so much distaste for this specific business opportunity of dropshipping and then we can branch out into other models. But I think it’s interesting because one of the things that really struck me about it is I think that there’s three key elements. The first is the practitioner to preach ratio. So first off, Ian, could you just describe what a dropshipping business looks like?
Ian: Sure, and like you said, I know of 10 business models that you could have written this article on, in terms of people that are sitting in Bali, this person just decided to pick dropshipping. There’s 10 other business models, people sitting in cafes that they’re working on right now.
Dan: I love your last point there. Let me read the last line. “They’re prospecting for gold’, and they’re talking about these Canggu digital nomad types, “With their backpacks and dollar signs in their eyes”. This is great writing, she can really weave a yarn. “They’re prospecting for gold amongst the melon ballers and avocado slicers of AliExpress, throwing junk at the Internet and hoping some of it sticks”. By the way, I just bought some radio equipment from a dropshipper the other day. The idea that this is what dropshipping is .. (laughs).
Ian: Well, first of all, throwing spaghetti at the wall and seeing what sticks is. That is what entrepreneurs do. That’s what they’ve been doing forever. And you have to continuously throw spaghetti at the wall to see what sticks. So yeah, people are trying to figure it out there, shoot, come to a location. See some people hustling, trying to baseline, trying to keep their expenses as low as possible in foreign country if they’re from somewhere like America. I don’t know how you can hate on that.
Dan: People hate on everything.
Ian: But let’s discuss what dropshipping is, and why I think it’s a vulnerable model. Now, the author doesn’t really go into that. But let’s talk about it from a business perspective. Okay, so drop shipping is basically this: back in the day, if you were a manufacturer of a product, a lot of times you manufacturers did not want to deal with the distribution of goods, meaning they’re like, ‘Hey, I’m really good at making computers. I don’t have anything to do with the retail side of it, you figure out a way to get to the store’.
So, dropshipping has actually existed for a very long time. It’s the middleman between retail and the manufacturer. Now, a couple things have changed over the last 20 or 30 years, which basically is that manufacturers are willing to work directly with people, say these dropshippers, to retail their products. So sometimes you don’t even need a store. Okay, I’m going to start an e-commerce site built on WordPress, I’m going to sell directly to the customer. I contact the manufacturer, I say, ‘Hey, I just sold a unit’. The manufacturer sends it directly to the customer so it never even touches me or my warehouse.
So there’s a lot of efficiency that can be had in this model. Because before, remember ‘Circuit City’ Dan? It was this American electronics store. So if you’re Sony, you manufacture a product in Japan. You put that thing on a boat, and then it goes to a distribution centre and then it goes to 300 ‘Circuit City’ stores. Then I can come in as a customer and then I buy that. It’s just a bunch of wasted fuel and time. So people have now come in and manufacturers are receptive to this and they’ve said, ‘Hey, I’m gonna set up a website, I’m gonna sell a product, you’re gonna ship it directly for me’.
Dan: And now there’s so many different ways you can inject yourself as a dropshipper taking advantage of this business model. So for example, there could be a big manufacturer that produces radio electronics, like we talked about the top of the show, anything to do with radios and electronics and connector cords and antennas and stuff like this.
But you start a dropshipping store, that’s all about ‘Putting a CB radio in your truck’. And so then you go to that big manufacturer of radios and you say, ‘I know you’re retailing’. In the modern day they’re probably retailing that on their website or selling to distributors or whatever. You go to the manufacturer and say, ‘Hey, I’d love to include your CB radios on my website, can I get a wholesale rate?’ and then they’re shipping direct to your customers, sometimes with your brand on it, and that can be negotiated depending on how much leverage you have with the supplier. And so you own the customer and you make the margin between the wholesale rate and the manufacturer’s suggested retail rates. So most dropshippers are selling at that MSRP, they’re not jacking up prices hoping that people didn’t price shop on the Internet or something. They’re making the margin with that wholesale rate. Is that a fair enough basic roundup of dropshipping?
Ian: Yeah, dropshippers. Just talk a little bit about the platforms. Dropshippers could have their own websites, they could sell on Amazon, they could sell on eBay, they could sell on Etsy. And a lot of them do, a lot of them figure out where the customers are, so they don’t have to build their own audience.
Dan: I think the model for a lot of dropshippers is essentially to build on their own platform ideally, because once you’re building on Amazon, you’re totally giving up your marketing channel, essentially to a third party.
Now, I think that there’s three fundamental things here that cause problems for critics. And the article writer I think, would for sure be a critic and there’s a lot of vocal critics online. The first one Ian is, I think, ‘practitioner to preach’ ratio of a lot of the gurus in the dropshipping space. And the question with guru-ship or advice brokering online is the question that I think every advice giver needs to address their practitioner to preach ratio, which is: if doing what you say you should do is so valuable, aka in this case building a dropship store, then why are you spending your time selling courses to other people who want to build a dropship store? So if your advice was really that valuable, it wouldn’t even exist as advice, because you would implement it yourself and make tonnes of money.
Now, part of the reason why this is such an interesting critique is that it’s actually true in a lot of cases that the old adage of ‘those who can’t do teach’ is often of a good rule of thumb to apply to people that distribute information around the internet. I can even raise my hand up and say, ‘Yeah, I could go start another ecommerce store but it’s very, very hard. I did it when I was a little bit younger and right now I’d rather talk about these issues with you guys, which is a more fun business model, it’s diversified and stuff, then do what I used to do, which is really hardcore shit and very, very difficult’.
Ian: Another one of the critiques around this model of preaching and selling courses is that there’s not a lot of transparency around it. So you really don’t know how many of these people are successful when they take these courses. You really don’t know if that’s the last $2,000 that somebody had to spend and they spent it on a course that didn’t help them to grow a business or start a business.
Dan: But promised and was sold in a way that suggested that it was simply follow step one, two and three, and then bada bing bada boom after you pay x thousands of dollars, you’ll have a business
Ian: And you can see why people would be suspicious and you should be suspicious of many of these things because they have the potential to over promise and under deliver because there’s so little transparency around it. So yeah, I would be suspect of any of these types of businesses in any of that type of information because here’s another thing about that type of information is the more you distribute it, in theory, the less valuable it becomes.
Dan: Yes. And that’s actually a nuanced point that has happened in the dropshipping world. So as more and more average Joes and Janes figured out about the opportunity to just follow step 123 and 4, ‘I just figured out a niche blah, blah, blah’. Now, what’s happened is that these manufacturers that do dropshipping, they’ve been exhausted by requests from people sitting on their laptops in some nice location to become dealers. And so those dealership terms have changed. And it is a zero sum market. There’s only so many X’s that are going to get sold, the pie doesn’t keep getting bigger necessarily. And with a lot of the marketing acquisition channels that you target, they’re also zero sum games, whether it’s SEO, whether it’s Google product feeds, whatever. So absolutely, the mere fact of selling those courses itself makes that less valuable.
The second thing, I think the reason that certain niches are much more apt to have these kinds of products is that they’re more legible. This idea that you could even show up to Bali in a week and understand how everything works and stuff is an idea that applies itself to this very simple business model of dropshipping. And so you hear, gurus online, people that teach this stuff, and they emphasise all the time how simple it is, right? And I do think that this simplicity and the legibility of dropshipping is what makes it a less profitable business model on the whole. It’s like the stock market, right? It’s not a bad investment, it’s just not a particularly good one. You might not double your business every year for 10 years. Because it is just that available. It is just too legible. It’s too ‘retail’ so to speak.
Now, I think the other critique you could levy on a lot of the gurus is: well, if it’s so simple, then what’s the point of the course? Well, you know, structure teaching, I think all there’s real value and all those things, but there’s also typically a little bit of a secret sauce. And typically in the world of dropshipping that has to do with customer acquisition, a specific channel that’s lucrative to a certain number of niches right now.
Ian: Which is probably changing all the time.
Dan: Yeah, and it’s not gonna be something, you’ve never heard of, or whatever it’s gonna look like something like a particular Facebook funnel, or it’s going to look like Google product feeds or it’s going to look like SEO, it’s not going to be some earth shattering thing that they want you to think. It’s going to be, ‘Look, this works. Here’s a type of product that works for it, focus in and all that’. And one of the other critiques levied now is: maybe these things just don’t work out for most people. This is my third critique. And I got one more. Most spaghettis don’t stick to the wall. And there is some value in structuring information.
We spoke with a gentleman the other day who took an expensive dropshipping course. He had another career, he didn’t have a tonne of knowledge about internet marketing or online business. And he took that information, he applied it. He started throwing spaghetti and three years later he has a legitimate business and he lives wherever he wants and all that kind of good stuff. So there is value in just getting information, applying it, taking action and seeing what happens. Now would I spend my last hundred bucks on it or last couple thousand bucks on it?
Ian: Maybe depending on how desperate you are. Would you be just disappointed if it didn’t work out? Probably. Is it on you to make it work out? Yeah, absolutely.
Dan: And that’s the other thing, this dispersed responsibility, right? It’s never gonna be the guru’s fault.
Ian: Well, in America and I think in other parts of the world too, there’s consumer protection acts which basically protects you from buying faulty or bad products. I’m not sure how that actually applies to tech.
Dan: Never protected me.
Ian: Well, if you buy a new car, for example, spend $25,000 and it’s problematic it can get recalled through the Lemon Law, and you can get your money back basically saying the manufacturer wasn’t responsible when they made this product, it’s got too many faults, you deserve to have your money back.
And I think a lot of people are probably frustrated with the idea that they have to actually take responsibility for their own actions and do their own due diligence on this stuff, figure out or not if it’s going to work for them. And maybe maybe true, maybe there should be some kind of consumer protection, maybe you should have to have a 5% success rate. But here’s the problem. How do you quantify success in something like this?
If you’re the gentleman that you were talking about, he took a course and then he figured out a way to replace his income in 1000 days, yeah, I’d say that’s success. A lot of people don’t have that. But how many pivots did he have to make after that? How many changes did he have to make after he read that information, that course? How willing to do that was he?
Something else for me in this whole dropshipping thing is dropshipping for me is not the end of the game. It’s the beginning of the game. I don’t even know if it’s still an opportunity, really. I mean, people are doing it, I hear about it. I see people doing it, it looks great. I still think it’s vulnerable to competition, which it always has been. And so I think I don’t think of it as an endgame. I think of it as a jumping off point, it’s the first piece of spaghetti that you throw against the wall, you figure out how to replace your income. Okay, now, how am I going to create my own products? But maybe just learn a lot from the market and from being in there and, and figure out, figure it out for yourself.
Dan: Well, and I’ll say this, this is my final point. And I think the implied critique about all this is that if what you’ve done is gone out and made a successful dropshipping store, teaching other people how to do that might represent a more safe and profitable diversion then going out and starting more stores. And I think that that’s part of the reason if you combine that simple diversification, there’s an enormous desire in the marketplace for people to learn how to make money online, to learn how to live everywhere.
Now if what you sell is CB radios or whatever, and now you’re thinking about getting into fishing poles or avocado slicers, or whatever. And on the other hand, it’s like, ‘Oh, I make 25 grand a year, how about I just teach other people how to make 25 grand a year. And now I make, you know, hundreds of thousands teaching people how to do it’. It’s pretty obvious why that diversification would look more appealing to someone that’s in a business model with low margins and high competition. And so I think that’s really the final critique. And that’s what leads to this outsize practitioner to preach ratio, which is ‘Yeah, that diversification makes a tonne of sense when most stores you start are going to fail and even the ones that work out you’re going to have low margins and high competition’.
Ian: Dan, I went to a private university, a fairly expensive one, spent three and a half years there. And when I got my diploma and even before that, actually, I realised that this institution, which is internationally known, did not have any kind of Career Centre. There was no ‘After college, this is what you should do, we’re going to help you get a job’. I was completely dumbfounded to find out that this university did not have a path for me to get a job. So here I was having spent thousands and thousands of dollars way more than $2000. And I had no prospect of a job or anything like that after university. Which is a bigger crime? You spend $2,000 on a dropshipping course, and there’s no picture of what you should do next, there’s no path for you?
Dan: This guy is getting out of control, we got to get security in here man, he is intense.
Ian: I’ll tell you the bigger crime, you figure it out though.
Dan: So all this leads me to want to posit this kind idea that if there is a lot of guru-ized information and legible courses around the specific kind of business you want to start, it might not be a great business opportunity. It might be low margin, it might be high competition but like my guy, Travis Jamison, said on Twitter after all this debate, ‘I think this is a situation of not hating the game, hating the player’. And there’s some players out there that are going to be shady. And they’re going to want to know your niche so that they can figure out how to steal your business, and then they’re going to want to teach it to other people. And then there’s going to be people that are upstanding individuals who are in the game because their hearts are on their sleeve. They want to know the product, they want to help their customers. And those are the people that I see winning in the long term because they care about the product, they have a sense of empathy for what’s going on. And they can evolve their business towards more profitable opportunities, whereas it’s the mercenary types that I often see trying to make a quick buck. Those are the people that don’t fare so well and honestly catch a little bit more flack online because karma is a bitch.
Ian: Dan, for me, this piece really highlights a lot of just essentially ‘owning the responsibility’. You get you have to be responsible for your own actions, your own compulsions, your own purchases, all this stuff. You go to the internet these days, and you type in a little Google search. And a lot of times you end up in a place where you didn’t want to end up or you end up getting sold a product you don’t want to get sold.
A lot of people say that’s Google’s fault. But that’s how it works, right? It’s not really Google’s responsibility. That’s their product, that’s their company. It’s up to you to decide whether or not that works for you. Same thing with all this stuff, man. You don’t want to be sold a course that you don’t think is going to work, don’t buy the course. You don’t want to get into dropshipping because the margins are low and because potentially you’re getting a box in by your competition, don’t do it.
Dan: The final question I got for a Bossman is: can you buy your way into business with information? By the way, one of the things I wanted to mention about that mix of guru- ization, highly legible and low margin, what is the number one space online is for all this? Investing? Investing and real estate. If you’re gonna critique the gurus of dropshipping then you gotta be critiquing the gurus of real estate.
The question I asked was, ‘Can you buy your way into entrepreneurship?’ And I think the answer is it’s complicated. Again, these things are, by definition, not highly legible, because the whole point of starting an entrepreneurial venture is that it’s not a commodity that tracks with a bunch of other commodities that everybody can know about. It is an asset that behaves a little bit more uniquely.
And so one of the ways you can use your money to buy information is to go, this is something that JP mentioned a few episodes ago, JP Ji. He said, ‘If you want to know some information, focus on who knows it rather than what the information is’. And I just thought that’s such a great rule of thumb because if you see a guru online through a blog post or a video. If you have money, you’re much better off using it to meet them than to purchase their information.
And I’ll say this from personal experience having met a lot of personas online, a lot of the unrest below the surface that you’re seeing is a little bit of the silent majority or whatever, the murmuring majority of the people who’ve met them in real life and realise that it doesn’t quite add up. And those things can take a really long time to come out in the woodwork. So I think it’s a more efficient use of your money to try to use it to meet successful people, see how they prioritise information in their head and see how they operate. Rather than …
Ian: It’s a little bit more honest.
Dan: Honest, but it’s also a little bit pollyannaish to think, ‘Oh, the best thing that this person has is going to be in that blog post’ or whatever. No, they got a little something up their sleeve. It’s best for you to shake their hand and then take the other hand and look up the sleeve. Alright boss, Bossman. You wanted to talk about platforms?
Ian: Yeah, this dropshipping article just got me thinking about: alright, you’re reading this and you’re maybe getting into dropshipping. Or you’re actually interested in owning a small business and being an entrepreneur. Let’s talk about the meta discussion here. Yeah. Like, should you be in Bali? And should you be taking advantage of people, screw that, let’s talk entrepreneurs for a second, let’s talk about people that actually want to change their lives.
There’s a lot of different ways to get into entrepreneurship, with varying degrees of legibility. And I think one of the easiest ways to get into entrepreneurship is to leverage whatever skill set you have, even if it’s just a small one, maybe know how to cut the best grass in the neighbourhood. Hey, that’s a skill set. That’s something that people are willing to pay you for. Can you translate it to an online business tomorrow probably not? But it’s a way to get in the game and to start making money. And I started to think about this dropshipping idea and part of my problem with dropshipping as a business model, and as somebody that wants to be in business for a long time, sustaining my lifestyle, never having to go back and get a job is it’s susceptible to attacks, meaning you’re kind of always hitching your wagon to some other vehicle, and it might not be one that you want to actually hitch to. So for example, a manufacturer goes out of business, you’re out of business, for example, a manufacturer raises prices or lower prices that affects your margins, you’re in trouble.
Dan: So let’s talk specifics, though, because the idea is that with all these business models that are highly legible. Typically, you’re taking a specific shortcut in order to get certain benefits faster. Now, I’ll tell you, one of the things I like about the dropshipping approach, versus the skill set approaches is it gets you focused on the market and other people.
Dan: So dropshipping doesn’t start with you sitting around saying, ‘What am I good at?’ It says, ‘Go look at these different customer acquisition channels’. Now you acquire a customer say through SEO or Google product feeds, they come to your website, you have the right CB radio. The problem is a lot of other people have that CB radio, too. So the question is, ‘Well, why are they coming to you?’ And if at the end of the day, your answer is, ‘Well, they come to me because of SEO’, then my question would be, ‘Well, why are they going to come back to you?’
Dan: And if you don’t have that brand, like, ‘Oh, I have 10,000 videos on my website and their narrative based, and they have little cartoons, and everybody loves the cartoons. And so anytime they want anything to do with radios that come to watch my videos’,now that’s getting somewhere, right, that’s like turning yourself into more of a brand, something that’s memorable. And so this is the way I think the entrepreneurial path, which is driving down the value chain, which is, yeah, dropshipping it gets you focused on something other than yourself’. It gets you in the game potentially quicker because you don’t have to develop a product, but you do have to develop something, which ideally would be a brand. Or you could also develop products. That’s another option.
Ian: That’s what I was going to say, dropshipping for me, it has to lead to some kind of brand or some kind of ownership of IP. A lot of people, they start off in dropshipping and then they end up making their own products, which for me as a product designer would be exactly where I would end up.
And it’s exactly what Amazon is doing too. They have a bunch of people selling products for them. They’re gathering information on what the best selling products are. They’re making tweaks and they’re coming out with their own products.
There’s a lot of problems with a lot of different platforms. Some of the same problems exist when you sell on Amazon, eBay, Etsy, you’re buying into the customer base which is amazing because it can shortcut you potentially years and years off acquiring a customer. If you had to build your own chain of customers, it could take you two years.
Dan: It’s not a deal with the devil. It’s a deal with one of the devil’s committee members.
Dan: Here’s what – so journalists, their job is to tell you a story that maybe you didn’t hear before. I’ll tell you, here’s a very common story of the people that listen to this podcast, that maybe they got here because they took a dropshipping course. And they ran through all the modules. And they started meeting people, and they said, ‘Hey, have you listened to this podcast? I liked this podcast’, they come over here. And meanwhile, they’re on year 2,3,4 of running their dropship store and they listen to guys like me and you say ‘build a brand, go to the product’ and they nod their head and they’re worried about the defensibility of what they’ve done, and so they start coming to events and now they got tonnes of entrepreneurial friends and maybe they moved to Spain for the summer and things keep going and they still keep tinkering with the brand.
Fast forward 7-8 years all the same concerns still exist except they’re kind of wealthy now because all the worries that they had about that dropship store they started seven years ago didn’t materialise. Sometimes they do, and sometimes they’re just out of business, whatever.
But my point is, this story doesn’t get told either, which is that: there’s nothing here that’s safe. The most dangerous thing you can do is not get started. It’s like the best time to start a business was 20 years ago. The second best time is today. But if that large guru fee isn’t a problem for you, I say no harm, no foul. Get the information, watch the process, see how they sold you. There’s nothing that can’t ultimately contribute to your education and getting you chucking that spaghetti.
Ian: Be wary of who you get information from, whether it be journalists dropshipping course authors or podcast hosts like us.
Dan: Information that comes in this form is suspect by its very nature. Go for the ‘who’ not for the ‘what’ and start chucking spaghetti. I totally agree with you Bossman. Speaking of information, we will be back next Thursday morning 8am Eastern Standard Time.