## Highlights - Someone once told me that there are two kinds of geniuses. One is the person who says things you could never have thought of and don’t fully understand after hearing them. That genius reveals the massive gulf between you and him or her. Albert Einstein describing his theory of relativity is the ultimate example. The other type of genius is a person who can take a jumble of confused thoughts and reassemble them so clearly, so simply, that it makes you feel as if you, yourself, are the genius, since you now fully understand something that was in there, in confused form, in your brain, all along. Scott Stern is that second kind of genius. ([Location 280](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=280)) - Step one: understanding how your business adds and captures value. This crucial step is worth elaborating on. Think of any business that has a shot at success. Someone is doing something that creates value. ([Location 519](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=519)) - The second step is to pick your customer. This might seem odd. One would think that either customers show up or they don’t. But Scott points out that customers are not one undifferentiated mass of identical people. They have different interests, different levels of hunger for your product or service. A business needs to identify the customers it wants, and it should figure out who wants its product enough that it can charge whatever it needs to in order to make the business sustainable. ([Location 581](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=581)) - The third step, the one that Scott says most people find confusing, is to pick your competition. How can you pick who you’ll compete with? Scott points out that every company has a variety of options in the ways they take their product or service to market. Eitan, again, provides an example. He framed his entire sneaker business around Nike. He talked about Nike. He designed the shoes to look a bit like Nikes. He ordered them from the same factory Nike used. He felt Nike was his competition. That meant that people saw his shoes as cheap Nike knockoffs, and nobody wants to buy cheap Nike knockoffs. He could have chosen a different competitor—for example, the lousiest of discount sneakers. He could then have argued that his product was more durable, more stylish, better performing than the bottom of the barrel. By choosing that competitor and framing his business around capturing its share of the market, he would then have had an easier time seeing his subsequent choices. He would have needed a low-margin, high-volume business strategy. ([Location 599](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=599)) - Price should drive costs, not the other way around. It took me a long time to understand the significance of this rule. We are wired to think that price is connected to cost. You calculate the cost of the raw materials you use, the time it takes to produce a good or service, you add some amount for profit, and that’s your price. With intangibles, like our time, we look to competitors and charge around whatever it is they do. This is precisely backward. Think of making a luxury car. You would prefer to have a sense of how much people would pay for a certain degree of luxury before you began choosing the materials to go into the vehicle. You determine the price point, and then you reverse engineer the vehicle in line with those costs that can justify the price. You include the smooth leather but recognize that hand-tooling might bump the car’s cost beyond your optimal price. ([Location 774](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=774)) - the crucial Passion Economy question: What is the value I am creating that is beyond that of similar businesses or services, and who am I creating it for? ([Location 869](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=869)) - The essence of the Passion Economy is that a person’s particular set of passions and skills becomes a product or service that is matched to the pressing needs of a particular kind of customer at a particular time. ([Location 907](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=907))  ## Highlights - Someone once told me that there are two kinds of geniuses. One is the person who says things you could never have thought of and don’t fully understand after hearing them. That genius reveals the massive gulf between you and him or her. Albert Einstein describing his theory of relativity is the ultimate example. The other type of genius is a person who can take a jumble of confused thoughts and reassemble them so clearly, so simply, that it makes you feel as if you, yourself, are the genius, since you now fully understand something that was in there, in confused form, in your brain, all along. Scott Stern is that second kind of genius. ([Location 280](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=280)) - Step one: understanding how your business adds and captures value. This crucial step is worth elaborating on. Think of any business that has a shot at success. Someone is doing something that creates value. ([Location 519](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=519)) - The second step is to pick your customer. This might seem odd. One would think that either customers show up or they don’t. But Scott points out that customers are not one undifferentiated mass of identical people. They have different interests, different levels of hunger for your product or service. A business needs to identify the customers it wants, and it should figure out who wants its product enough that it can charge whatever it needs to in order to make the business sustainable. ([Location 581](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=581)) - The third step, the one that Scott says most people find confusing, is to pick your competition. How can you pick who you’ll compete with? Scott points out that every company has a variety of options in the ways they take their product or service to market. Eitan, again, provides an example. He framed his entire sneaker business around Nike. He talked about Nike. He designed the shoes to look a bit like Nikes. He ordered them from the same factory Nike used. He felt Nike was his competition. That meant that people saw his shoes as cheap Nike knockoffs, and nobody wants to buy cheap Nike knockoffs. He could have chosen a different competitor—for example, the lousiest of discount sneakers. He could then have argued that his product was more durable, more stylish, better performing than the bottom of the barrel. By choosing that competitor and framing his business around capturing its share of the market, he would then have had an easier time seeing his subsequent choices. He would have needed a low-margin, high-volume business strategy. ([Location 599](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=599)) - Price should drive costs, not the other way around. It took me a long time to understand the significance of this rule. We are wired to think that price is connected to cost. You calculate the cost of the raw materials you use, the time it takes to produce a good or service, you add some amount for profit, and that’s your price. With intangibles, like our time, we look to competitors and charge around whatever it is they do. This is precisely backward. Think of making a luxury car. You would prefer to have a sense of how much people would pay for a certain degree of luxury before you began choosing the materials to go into the vehicle. You determine the price point, and then you reverse engineer the vehicle in line with those costs that can justify the price. You include the smooth leather but recognize that hand-tooling might bump the car’s cost beyond your optimal price. ([Location 774](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=774)) - the crucial Passion Economy question: What is the value I am creating that is beyond that of similar businesses or services, and who am I creating it for? ([Location 869](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=869)) - The essence of the Passion Economy is that a person’s particular set of passions and skills becomes a product or service that is matched to the pressing needs of a particular kind of customer at a particular time. ([Location 907](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=907))  ## Highlights - Someone once told me that there are two kinds of geniuses. One is the person who says things you could never have thought of and don’t fully understand after hearing them. That genius reveals the massive gulf between you and him or her. Albert Einstein describing his theory of relativity is the ultimate example. The other type of genius is a person who can take a jumble of confused thoughts and reassemble them so clearly, so simply, that it makes you feel as if you, yourself, are the genius, since you now fully understand something that was in there, in confused form, in your brain, all along. Scott Stern is that second kind of genius. ([Location 280](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=280)) - Step one: understanding how your business adds and captures value. This crucial step is worth elaborating on. Think of any business that has a shot at success. Someone is doing something that creates value. ([Location 519](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=519)) - The second step is to pick your customer. This might seem odd. One would think that either customers show up or they don’t. But Scott points out that customers are not one undifferentiated mass of identical people. They have different interests, different levels of hunger for your product or service. A business needs to identify the customers it wants, and it should figure out who wants its product enough that it can charge whatever it needs to in order to make the business sustainable. ([Location 581](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=581)) - The third step, the one that Scott says most people find confusing, is to pick your competition. How can you pick who you’ll compete with? Scott points out that every company has a variety of options in the ways they take their product or service to market. Eitan, again, provides an example. He framed his entire sneaker business around Nike. He talked about Nike. He designed the shoes to look a bit like Nikes. He ordered them from the same factory Nike used. He felt Nike was his competition. That meant that people saw his shoes as cheap Nike knockoffs, and nobody wants to buy cheap Nike knockoffs. He could have chosen a different competitor—for example, the lousiest of discount sneakers. He could then have argued that his product was more durable, more stylish, better performing than the bottom of the barrel. By choosing that competitor and framing his business around capturing its share of the market, he would then have had an easier time seeing his subsequent choices. He would have needed a low-margin, high-volume business strategy. ([Location 599](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=599)) - Price should drive costs, not the other way around. It took me a long time to understand the significance of this rule. We are wired to think that price is connected to cost. You calculate the cost of the raw materials you use, the time it takes to produce a good or service, you add some amount for profit, and that’s your price. With intangibles, like our time, we look to competitors and charge around whatever it is they do. This is precisely backward. Think of making a luxury car. You would prefer to have a sense of how much people would pay for a certain degree of luxury before you began choosing the materials to go into the vehicle. You determine the price point, and then you reverse engineer the vehicle in line with those costs that can justify the price. You include the smooth leather but recognize that hand-tooling might bump the car’s cost beyond your optimal price. ([Location 774](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=774)) - the crucial Passion Economy question: What is the value I am creating that is beyond that of similar businesses or services, and who am I creating it for? ([Location 869](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=869)) - The essence of the Passion Economy is that a person’s particular set of passions and skills becomes a product or service that is matched to the pressing needs of a particular kind of customer at a particular time. ([Location 907](https://readwise.io/to_kindle?action=open&asin=B07Q231X35&location=907))