Friday, March 4, 2011

The Danger of #winning

I decide to leave ESPN, start my own blog and charge $10 per year for anyone to read my column. Just for fun -- again, it's hypothetical! -- let's say one million readers sign up, guaranteeing me $10 million for that first year (2007). And let's say I sign advertising deals with three sponsors for another $2 million apiece, raising my total haul to $16 million for Year 1. I spend the next 12 months writing and pinching myself for my good fortune. Life is good.

Fast-forward to December 2007. I just learned something about myself. I don't like it. I know it's wrong. I can't shake it. I can't deny it. See, I really, really like money. Even if I never imagined making $16 million in my lifetime, much less for a single year, I now find myself smitten by those dollar signs. How much more can I make? How high can this go? Someday, I want my financial adviser to cackle and say, "Good Lord, I don't even know what to do with all this cash flow." That's what I want.

Hence, I need to raise the total value of my "franchise." I build a more sophisticated website, pay for designers and extra bandwidth, then hire a team of writers and editors to work for me. That creates $2 million in expenses for Year 2, which I pay off by finding a fourth sponsor. In order to cover these additional expenses, I'm "forced" to raise the 2008 subscription fee to $25. (That's what I tell my idiot readers.) This time around, only 700,000 readers sign up. Between sponsors and subscribers, I am still guaranteed a total haul of $23.5 million for Year 2. Profit. This is good. I am showing "growth." Even as I slowly antagonize my audience.

By the end of Year 2, I have the hottest sports website on the Internet. Everyone wants to work for me for the visibility and prestige, and also because I share revenue with employees (they get salaries plus a small piece of everything I am pulling in). An overload of potential sponsors allows me to jack my rates and pocket $30 million in ad revenue for Year 3. But you know what? I love the smell of money. I can't get enough of it. Sometimes I go to the bank, withdraw a wad of $100 bills, throw it on my desk, lean my face over it and smell the pile like cookies baking in an oven. I can't get enough. I am insatiable. I need more.

For Year 3, I limit subscriptions to 300,000, then sell "personal subscription licenses." For an upfront fee of $200, a reader would purchase the right to subscribe for 10 years -- a decade-long contract of sorts -- at whatever price I charge. Did you catch those last five words? At whatever price I charge. How stupid are these people?

Here's the thing -- it's comforting to imagine that this is greed because of self-interested money. But imagine falling into exactly this cyclical trap because you wanted to grow?

The same thing can happen to non-profits, or to any form of business. You want to grow, grow, grow. What are you willing to do to grow?

What am I willing to do to grow?

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