The ONE skill you need to build a business without an MBA | RP 99

History & the Arts

3 business reasons to make peace with math (the last one is from Jeff Bezos)

If you’re like me, you didn’t enjoy math in school.

It didn’t feel intuitive.

It felt like you were constantly falling behind.

It only got worse when you hit algebra and letters got mixed in with numbers.

But if you’re serious about business, then you can’t escape math.

The good news?

You don’t need to learn calculus or differential equations.

You just need to use it to answer a few basic, practical business problems to kickstart the process.

Zero to 1: Math reveals the growth levers of business

Whether your dreams are to make $100,000 from 1,000 true fans or to grow a $1M business, math gives you a toolkit to get there.

Understanding the factors that generate revenue for a business gives you a starting point to begin building it.

In online business, for example, there are three common business models:

• Sponsorship revenue = Audience * engagement rate * CPM

• Subscription revenue = Audience * conversion rate * subscription fee

• One-time purchase digital product revenue = Audience * conversion rate * average order value

If you look at online business from the lens of business equation, you’ll see that the common denominator is an engaged audience. If you’re just starting out, then you know that is what you should focus on.

1 to 10: Math reveals how to grow a business

Once you have a basic handle of the revenue equation above, you can begin optimizing the levers to grow it.

For online businesses, you have 3 options to grow:

1. Increase your audience

2. Increase your engagement rate

3. Increase your CPM, subscription fee, or average order value

Most people obsess with growing an audience. But knowing the levers of business, you should think about increasing engagement once audience growth is steady.

You could also begin thinking about other metrics, like:

• Gross profit margin

• Return on investment

• Cashflow conversion

Each metric has its own set of levers to pull and optimize.

Knowing math gives you a snapshot of the health of a business… And an increasingly accurate way to improve it.

Scale & beyond: Math reminds you of the unquantifiable and irrational parts of business

As much as math helps you troubleshoot problems, understanding math is powerful because it reminds you of what you don’t know.

For example, a basic work-related math problem makes you think that more people = more productivity.

But if you’ve taken statistics, then you know that that’s not always true. More people might also mean more miscommunications and rooms for error.

This is what Jeff Bezos knew.

As an engineer and computer science student, he understood the handshake problem, that more people = more handoffs = mistakes.

As a result, Bezos instituted Amazon’s two-pizza team rule early on. Amazon’s early teams had the cross-functional makeup needed to solve hard problems, but stayed small enough to solve them quickly.

Amazon grew out of Bezos’ first principles understanding of mathematics. He applied this to grow a trillion-dollar company…. Even if he never went to business school.

😉 You're welcome

A selection of interesting links & fun recommendations.

• 🛠️ The Hemingwrite. An electronic typewriter for distraction-free writing. While I usually recommend gear I already use and love, the Hemingwrite and its portable sibling are gadgets I’d like to get in the future.

• 🛠️ Baboon to the Moon Go-Bag Small (40L). I’ve had this duffel/backpack for a year now. Its waterproof outer shell means I don’t worry about rain when I’m out. The extra wide opening lets me find my stuff or toss them in easily. Highly recommend if you find yourself getting caught in the rain, or need an all-in-one bag for brief trips.

• ❝ A quote from copywriting legend, Gary Halbert: