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Option Three: Create a Product

Creation is a better means of self-expression than possession; it is through creating, not
possessing, that life is revealed.
—VIDA D. SCUDDER, The Life of the Spirit in the Modern English Poets

Creating a product is not complicated. “Create” sounds more involved than it actually is. If the idea is
a hard product—an invention—it is possible to hire mechanical engineers or industrial designers on
www.elance.com to develop a prototype based on your description of its function and appearance, which
is then taken to a contract manufacturer. If you find a generic or stock product made by a contract
manufacturer that can be re-purposed or positioned for a special market, it’s even easier: Have them
manufacture it, stick a custom label on it for you, and presto—new product. This latter example is often
referred to as “private labeling.” Have you ever seen a massage therapist’s office with its own line of
vitamin products or the Kirkland brand at Costco? Private labeling in action.

It is true that we’ll be testing market response without manufacturing, but if the test is successful,
manufacturing is the next step. This means we need to keep in mind setup costs, per-unit costs, and order
minimums. Innovative gadgets and devices are great but often require special tooling, which makes the
manufacturing start-up costs too expensive to meet our criteria.

Putting mechanical devices aside and forgetting about welding and engineering, there is one class of
product that meets all of our criteria, has a manufacturing lead time of less than a week in small
quantities, and often permits not just an 8–10 x markup, but a 20–50 x markup.

No, not heroin or slave labor. Too much bribing and human interaction required.

Information.

Information products are low-cost, fast to manufacture, and time-consuming for competitors to
duplicate. Consider that the top-selling non-information infomercial products—whether exercise
equipment or supplements—have a useful life span of two to four months before imitators flood the
market. I studied economics in Beijing for six months and observed firsthand how the latest Nike sneaker
or Callaway golf club could be duplicated and on eBay within a week of first appearing on shelves in the
U.S. This is not an exaggeration, and I am not talking about a look-alike product—I mean an exact
duplicate for 1/20 the cost.

Information, on the other hand, is too time-consuming for most knockoff artists to bother with when
there are easier products to replicate. It’s easier to circumvent a patent than to paraphrase an entire
course to avoid copyright infringement. Three of the most successful television products of all time—all
of which have spent more than 300 weeks on the infomercial top-10 bestseller lists—reflect the
competitive and profit margin advantage of information products.

No Down Payment (Carlton Sheets)
Attacking Anxiety and Depression (Lucinda Bassett)
Personal Power (Tony Robbins)

I know from conversations with the principal owners of one of the above products that more than $65
million worth of information moved through their doors in 2002. Their infrastructure consisted of fewer
than 25 in-house operators, and the rest of the infrastructure, ranging from media purchasing to shipping,
was outsourced.

Their annual revenue-per-employee is more than $2.7 million. Incredible.

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