Tim Ferriss — "A muse as defined in '4-Hour Workweek', and as I use it in a business context, is any business that provides an automated source of income or cash-flow. I think it’s important for people to satisfy their financial needs before striving to address all these other needs because it really is a valuable, flexible currency, and ultimately the end goal is to spec out what you want to do, what you want to be, and what you want to have; work backwards from a target monthly income number; design a business to support that and provide that; minimize the number of moving pieces, automate it; and then you have, I suppose, what most people would consider complete freedom, in the form of options left, right and centre.
You evaluate the income you need by taking all these various things that you would defer for retirement and defining them very clearly, whether that’s for instance an Aston Martin DB9, a ski chalet in Colorado for a few weeks of the year, etc, etc, Even if that seems utterly unattainable - but all the things you would save for retirement if you could have five hundred million dollars or whatever. Then you look at how much that would actually cost to finance on a monthly basis. That could be through a car loan, through a purchase, or whatever it might be; and then you look at lets say the top two or three things in the ‘to-do’ and ‘to-have’ categories and you add them up to arrive at a target monthly income. It can be extremely expensive for the cars the trips and all that, it very seldom cost more than $75000 a year, very seldom. And that is liberating when people realize that. Then the trick is working backwards with that goal in mind, to provide a business that provides that, with the fewest numbers of hours of input as possible.
You can turn many different types of products and services into muses, but some are easier than others. Products tend to be easier than services, because services tend to have more of a manual component at some level, and secondly: customer support issues. In terms of margin, I like people to aim for a retail-like margin which would be a 8-10x mark-up from cost of goods. By cost of good I am really just referring to the physical goods, I mean you can look at fixed and variable costs but theres no need to get too fancy. It’s really just my cost of producing 1000 units on a per-unit basis. But I encourage people to sacrifice margin in the beginning during testing. This is very important, but in effect to get a lower per unit cost you don’t want to stock up on a thousand units of a product you have never sold before. It’s a much better idea to prototype maybe dry-test, then only at that point make a small batch run of the product, even if you are only making 2c per unit as long as you’re not losing money. You want to test and not end up with an entire warehouse worth of product you can’t move. I think that in the beginning it pays, as long as you’re not losing money, even if you’re losing a small amount, to test effectively to know that when you when scale that you will have demand and be able to fill that demand effectively.
A muse in experimentation testing, whether that’s defining the market; identifying the cost of acquisition for a customer; product design; all that can be done while you have a full-time job, and I discourage people from cutting all ties and losing full-time income to focus on a business. You don’t have to make that leap. People tend to think of a)employed person or b)entrepreneur. I think theres a very broad spectrum and you can very slowly and methodically move from one to the other, and it doesn’t mean you have to end up at full-time entrepreneur, you can still keep your job and have awesome side-income. I am not going to name names but I am pretty sure you and I both know a guy who (a few years ago) worked at google and was selling millions of dollars through Shopify. And he did both very comfortably, so I don’t think you have to choose one or the other.
The internet and technology have made business much easier to start and run and analyze than even when I started doing things in 2001 - so much easier. Now you have everything from Amazon web-services; to Shopify; to real-time inventory management for very low cost, and it just goes on and on. I think there is also a deluge of tools - so that can be confusing to some entrepreneurs. They now have more options to choose from, but at its core I think there has never been a time to create a business that gives you income, time, and location independence. Its very exciting to see. In the last competition, what did we see - 3000 businesses? That would not even have been feasible in 2001, so very exciting.
By freedom of location, and theres an order in which I recommend reaching these different points of currency thresholds: you have income first and then you have location (as an employee) and then time, if you are self employed it would be time and then location. But by location independence it just means you are not tethered to one location. So you can work as easily in San Francisco (where we are now), as you could in Canada; as you could in Buenos Aires; as you could in Tokyo; as you could in Berlin. Which is exactly what I did for a year and a half while traveling around the world. It just so happened at the time the technology kind of sucked for doing it, and I was still able to do it but it was a pain in the ass, whereas it’s extremely easy now if you choose your tools correctly.
Muses interest me for a million and one reasons, but predominantly because it’s a search for elegance and I like elegant things. Whether that’s Toyota’s ‘Lean Manufacturing’ where they completely reinvent the auto industry because they are very meticulous about calculating and then removing unnecessary steps; whether that is the economy of motion; in this case its a business. You can create something that a decade ago would have required a staff of 100 people, yet now it’s run by a mother of two who works on it part-time and puts in a few hours a week. It’s the most efficient and effective use of resources."