Some people have told me that my book How To Make Money Online: Work From Home and Get Rich On The Internet has a misleading title because it is more about my failed business ventures than how to actually make money. My response has always been that the key to getting book sales on Amazon.com is to have a seductive title, and even, more importantly, to have a title with good keywords so the book comes up when people do a search. If I called the book How I Tried A Bunch Of Businesses That Did Not Work Out, But Made Money Anyhow nobody would ever find it or read it. Everybody wants to get rich; nobody wants to fail.
But, there is really more to it. I just couldn’t put it into words until I read the book Black Box Thinking: The Surprising Truth About Success by UK table tennis champion Matthew Syed (I found out about him via James Altucher’s blog). Syed’s previous book (Bounce) supports the “10,000 hour” rule that was made famous in bestsellers such as Outliers by Malcolm Gladwell and Mastery by Robert Greene. This rule states that it takes a minimum of 10,000 hours of practice to achieve world-class expertise in any skill (music, chess, sports, etc.). For example, most people do not know that The Beatles performed live in Hamburg, Germany over 1,200 times from 1960 to 1964, before they perfected their sound and became famous. But, new research shows that the 10,000 hour rule does not play as big a factor as previously thought. I would even add my own modification to that rule, hereby known as the “Borgos Addendum,” which states that in the world of Internet business, the rule is almost meaningless. For every Bill Gates or Mark Zuckerberg who did put in their 10,000 hours, there are thousands of successful Web startups run by young people with very little experience in their field. It certainly is a plus to have massive experience, but by no means is it a requirement. I myself have over 10,000 hours experience in the domain industry, yet the vast majority of domainers made more money than I did last year from it. As an “old-timer/expert,” it probably made me less likely to adapt to new technology (the new domain extensions [.club, .biz, .xyz, etc.]) and less likely to invest in new trends (the meteoric price rise of “Chinese” type short number/letter domains). So I sat on the sidelines and did nothing while others got rich.
Unlike his first book, Matthew Syed’s new Black Box Thinking book is all about the study of failure. It looks at how most people don’t learn from their own failures, and how an important part of becoming the best at something is making mistakes. Here’s an example Matthew writes about: “In their book Art and Fear David Bayles and Ted Orland tell the story of a ceramics teacher who announced on the opening day of class that he was dividing the students into two groups. Half were told that they would be graded on quantity. On the final day of term, the teacher said he would come to class with some scales and weigh the pots they had made. They would get an â€˜Aâ€™ for 50 lbs of pots, a â€˜Bâ€™ for 40 lbs, and so on. The other half would be graded on quality. They just had to bring along their one, perfect pot. The results were emphatic: the works of highest quality were all produced by the group graded for quantity. As Bayles and Orland put it: ‘It seems that while the ‘quantity’ group was busily churning out piles of work – and learning from their mistakes – the ‘quality’ group had sat theorizing about perfection, and in the end had little more to show for their efforts than grandiose theories and a pile of dead clay.'”
You can learn from your own mistakes, or even better, learn from other people’s mistakes. That is why my book is not a typical get-rich-quick type manual. With the Internet, anybody can make money. There is no secret formula. Everybody must follow their own path. Most people will fail, but you don’t have any chance of success unless you at least try.
In that spirit, here is a list of the top 10 business mistakes and failures:
1. Buying Sites – In 2012 I bought a bunch of sites from various sellers, but it did not work out very well. Two years later I sold all of the article type sites for $11,600. I had paid over $120,000 for them. I also bought 2 entertainment sites in 2012 for around $80,000. For the first one, the seller offered to keep it hosted for free on his managed server for 6 months. The server ended up dying, and his web host (1&1 Internet) did not have a backup like they were supposed to, so I lost the site. The 2nd site did ok, but was really not worth the trouble of running it, so I sold it for $12,000. I also bought 50-100 small sites back in 2005 and 2006, but none of them ended up being home runs. Many of the sites made significantly less than the sellers claimed, and it was a lot of trouble dealing with taking over the sites and moving them to my server (many times it would cause my server to crash, bringing down all my other sites also), so it turned out not to be worth it.
2. Big Websites – Almost every time I have put a huge amount of effort into creating a site, it has not made any money. I always think the next one will be the “big one,” no matter how many failed sites I launch. For example, several years ago I spent 6 months working on BigCelebrities.com, but it got no traffic, so I abandoned it. Other examples of this include WatchMovies.com (now VastMovies.com), BrainTumors.com (now TumorHelp.com), LocalArea.com (now LocalRecap.com), CoverFights.com, KindActs.com, GameReviews.com, and more. Some of my successful sites (such as Bored.com and Dumb.com), on the other hand, took very little effort to start. It all seems very random.
3. Dubious Business Deals – In the late 1990s, I paid around $20,000 to buy a bunch of keywords in some sort of browser search plugin. I never got any traffic from it. A few years later I also paid a similar amount to a company to develop a downloadable toolbar for Bored.com. That never ended up happening. These are just a few examples. Out of hundreds of dealings I have had over the years, most went fine, but after those big losses I was a lot more careful.
4. Partnerships – I have been involved in several partnerships, and almost every time it did not work out. The problems were not due to personality conflicts or differences in vision, it was always the same story: there was never any extra money to pay me anything. Any revenue that came in was always used for expansion (hiring more people, bigger offices, etc.) or to cover one crisis after another. But, even more than any of this, the bigger problem was that I invested a huge amount of time and energy in these projects, and never got anything out of them. I would have been much better off spending the time on creating my own sites instead.
5. Minisites â€“ In 2010, 2011 and 2012 I created a network of over 4,000 minisites (small, informational type sites) to help my domains rank better in Google and make more money than parking them. I paid for over 14,000 custom written articles for these minisites, which I personally bought from 30 different writers, and I spent a lot of time developing a content management system for all of this, but the domains hardly got any more traffic than when I had them parked.
6. Premium Domain Sites – I figured since minisites were no good, maybe trying the same thing with industry leading domains might work better. So, I bought some great domain names such as Physical.com, Weights.com, Pastries.com, and setup highly customized and SEO optimized WordPress sites on them. I made sure to only to have high-quality articles written for these sites, but they still received no significant traffic.
7. Bottlenecks – In the 1990s and early 2000s, I should have outsourced more of the work that I needed done. I always had a 1-2 year backlog of projects for my one full-time programmer. This was good, in that I never had to worry about having enough work to keep him employed, but bad because there were a lot of sites I could have launched much sooner if I had just been able to get them all done. Also, when I eventually expanded to have several different programmers (via outsourcing), I would always keep up the pace and think of even more sites to build, so overall I was much more productive. Another issue was that the first programmer I ever hired (part-time, around 1997) cost $50/hr so I was hesitant to have him do too many projects for me. At that price, it was not always worth it. But, later when I started hiring people at $10 and hour, that made it much less risky for me to spend a lot of programming time launching new sites.
8. Prepayments – Many times I have prepaid people for things, either to get a discount or just because that is what was required. More often than not, this does not work out. People almost always ask for more money for the next project before they finish whatever they were supposed to do.
9. Missed Opportunities – I should have started creating mobile apps much sooner than I did. I was an early Blackberry user, but at that time they were mainly for email and were no good for surfing the web or apps. I also was not on Facebook or Twitter. I understood the potential of this market, but because I was not a heavy user myself, I did not feel comfortable doing anything. I eventually switched to an iPhone and a whole new world opened up for me, but by then the app business was much more crowded.
10. Get Rich Quick Schemes – Before the internet came along, I spent several years buying “no money down” real estate. It was like the current “flipping houses” fad, but back then mortgage companies had much looser rules, and it was possible to use some creative techniques to buy investment properties no money down.
It was great experience for me, but being a landlord is a lot of headaches, and because I had no money, anytime something went wrong (like a roof leak) I had to fix it the cheapest way possible, and this would inevitably lead to more problems. Since I was broke, the only way I could get into real estate was with no money down, so I don’t regret it, but it was a lot of work and risk for very little profits. My downfall came when a tenant accidentally caused a fire in an 8-unit building I owned, and it had a large amount of damage. I received a $30,000 insurance check, but that only covered the hypothetical cost of repairs. The city’s building department said that to make the 100-year-old building habitable again, in addition to repairing it, I also had to bring it up to code, which among other things meant putting in all new plumbing and electrical. This was going to cost $100,000. I used the insurance money to make some repairs over a few years, but it was not fast enough for the building inspector, who considered the site a safety hazard, and the city eventually demolished it. Unfortunately, I still had a $50,000 mortgage on it, and I still had to pay taxes every year on the now vacant land. Plus, the city added a lien for the demolition costs. I called up the mortgage company and told them they now held a mortgage on a house that was no longer there, but that instead of defaulting on the loan, I just wanted them to change the loan to 0% interest. They eventually agreed to my terms. Many years later I was able to pay off the mortgage and give the land to the city for free in exchange for canceling the lien on it.
In addition to real estate, I also tried other risky money making ventures such as owning a 976 pay-per-call number, multi-level marketing, and investing in penny stocks. None of those ever made any money either.
Adam Grant, author of the new book Originals: How Non-Conformists Move the World, writes: “There are two kinds of failure: actions and inactions. You can fail by starting a company that goes out of business or by not starting a company at all. By getting left at the altar or by never proposing marriage. Most people predict that itâ€™s the actions theyâ€™ll regret more. We cringe at the anguish of declaring bankruptcy or getting rejected by the love of our lives. But we are dead wrong. When people reflect on their biggest regrets, they wish they could redo the inactions, not the actions. â€œIn the long run, people of every age and in every walk of life seem to regret not having done things much more than they regret things they did,â€ psychologists Tom Gilovich and Vicky Medvec summarize, â€œwhich is why the most popular regrets include not going to college, not grasping profitable business opportunities, and not spending enough time with family and friends.â€”
What did I learn from thirty years of mistakes? Every day in business is a learning experience, whether I win or lose. The Internet is constantly changing and what works well one year might totally bomb the next. And, what works best for me is not necessarily what is best for other people. Unlike in the traditional corporate 9 to 5 world, you should do things in the way that you are most comfortable with. There is no one right way to run your business. Some people raise millions in venture capital; others start from their dorm room or garage. Some entrepreneurs write a business plan; others fly by the seat of their pants. The important part is to always keep trying, to always keep learning, and to always keep dreaming about making it big.