Photo credit: Sam McGhee
The concept of permissionless leverage is simple: You build it once and sell it forever. It continues to create value for you without you needing to ask. In 2020, media and code are the principal examples of permissionless leverage. They’re also a major reason why being a solopreneur is more feasible than ever.
Traditionally, leverage was a matter of other people’s time and money, principally in the form of labor and capital—you ask employees to work for you (labor), and you ask investors to invest in you (capital).
These have barriers to entry like incorporation, hiring, and debt obligations, and worse, the return is linear. For every unit of time or money you spend, you get a specific output. Just like a day job, it’s an exchange.
If you build one thing, you can only sell one thing. If you print 10,000 copies of a magazine, you can’t sell 11,000, and if you mine three tonnes of coal, you can’t sell four.
But with products that have permissionless leverage, you can.
The old rich can throw their weight around with hundreds of employees and millions in capital. But with the advent of software and new media, you have Davids turning into Goliaths.
The rise of permissionless leverage
Permissionless leverage means there are no barriers to entry.
You can publish an app without a degree.
You can produce a film without a studio.
You can distribute an article without a newspaper.
Once you’ve made something, you can theoretically sell it an infinite amount of times. They’re made and distributed without gatekeepers; you don’t need permission. The only factor is whether it’s valuable enough to buy.
One-person shows like Joe Rogan now outcompete companies with hundreds of employees on a media playing field. And he’s doing it with one employee. Sole-founder newsletters like the Ferrari Market Letter rake in $2,000,000+ in annual revenue. Yet most people haven’t heard of it.
And it’s not just media. With code, we’ve got examples of one-page PHP sites with no frameworks like Remote.ok, a job board, raking in $65,000+ monthly. There are recruiting firms that need scores of employees to make that kind of money.
These individuals create something once and “sell” them thousands, if not, millions of times repeatedly. They have big levers. And a single move can satisfy millions of customers. This is the lever that solopreneurs need if they don’t want to be bogged down by operating an organization.
The competition curve
At the same time, we now have more people than ever switching from exchanging their time for money to exchanging the value they generate for multiples more.
The tricky part for the solopreneur is that all products grounded in permissionless leverage live on a curve that’s ruthless.
Short Head + Long Tail | Wikipedia
In the above chart, the green area is the short head. The best podcasts, books, software, and platforms live in the green. It’s the top of the food chain with the few raking in the most reward.
The yellow area is the long tail. Most products live here with little appeal to the masses. It’s where millions of entrants compete for smaller markets and the majority won’t make a living.
The short head is finite; there will always be a few at the top. But the long tail is infinite; there will always be new entrants coming into a market.
Permissionless leverage means you can be successful wherever you are on the curve, even with competition. We’ll get to the “how” soon.
Permissionless leverage is an investment
Just because we can instantly hit publish on a video, book, or blog post doesn’t mean thousands of people will buy it. It only means that it’s available to buy; there’s still a lot of work involved.
There’s usually a considerable upfront investment of time and energy to build the lever to create wealth. Solopreneurs have to put in the work, and when you’ve just entered, you’re far out in the long tail competing with others.
For a solo developer to create permissionless leverage, they need to make and own the software. Meaning they need to invest time to build a service, market it, and gain traction, all the while earning next to nothing.
In a job, there isn’t a long tail or competition. Eight hours might translate to $200, and a workweek means $1000. It’s an exchange of time for money, it’s linear.
Permissionless leverage isn’t like that; it’s an investment of labor, not an exchange. It’s media or code that eventually works for you, independent of time.
Nomadlist is a perfect example. The service ranks cities around the world on their liveability for remote work. The developer is a solo operation, and it was a whole six years ago that he launched the first version of the site.
This solo developer had put hundreds of hours into creating this product and yet the time wasn’t translating to money. The service was free. It was only after an investment of time and effort, iterations over multiple versions, and a considerable userbase that the product had leverage.Nomadlist 5.0 | 2019
The upfront work slowly translated to users and customers. His investment is creating him $400,000 annually (as of 2017). His employee counterpart working at $50 an hour would need four years to make that much.
With the power of permissionless leverage, Nomadlist’s founder doesn’t get a linear return. His efforts compound and the wealth he generates is independent of his time maintaining his product.
However, getting to this stage wasn’t an accident, the product needed to satisfy a need, and it did. Nomadlist carved out a place on the long tail successfully, but this is where most solopreneurs fail.
The long tail explained
When media and software are cheap and easy to produce, there’s a sea of apps and content that compete for attention. The big hits will take up most of the audience, and the long tail is where most other products will live.
Hundreds of thousands of individual creators and solopreneurs make up the long tail. And this is what the landscape for permissionless leverage looks like today; Wired predicted it in 2004. Creating content or software isn’t enough.
A lot of media platforms today will look like the graph above. And we can see that in the abovementioned Wired article by Chris Anderson. It highlights how platforms like Amazon make their money, and sheds light on our place in that model.
Sure, the most prominent authors on the platform will make the most amount of money, but Amazon will make the majority of their revenue from the hundreds of thousands of authors selling only a few copies of their book. The authors won’t make money, but Amazon will — it’s the reality of the long tail.
Making it on the long tail
Seth Godin writes in This Is Marketing:
“These huge marketplaces (Amazon, Netflix, iTunes, etc,) depend on the misguided hopes and dreams of individuals way out on the long tail.”
“Seperately, each one struggle. Taken together, it’s a good business.”
As depressing as that sounds for the solopreneur, there’s a way out from this fruitless competition. There’s a way to live very comfortably on the long tail.
Even though there are hundreds and thousands of creators on the long tail, there are millions of customers that buy from the long tail as well. These customers are a part of several thousand niche communities with their own long tails.
The most straightforward illustration of this is YouTube.
But YouTube has 31 million channels and 5 billion videos watched per day. With a long tail that long, we know that people aren’t watching at random. They have particular interests, and a single niche could be millions of users strong.
- The top ASMR creator has “only” 2.77 million subscribers.
- The top nightcore producer “only” has 1.9 million subscribers.
- The top electro swing dancer “only” has 400 thousand subscribers.
The top ASMR producer isn’t the top in the meditation category, nightcore won’t bring in a hit song worth of views, and electro swing dancing isn’t a popular style. However, these creators still have massive audiences and are at the peak of their own short head/long tail graph.
And that’s how the solopreneur builds their permissionless leverage — finding the shorthead of a niche.
Yes, it’s tough to get to the short head of a category that applies to millions of users but the shorthead of an esoteric interest? Not as tricky as it seems.
Finding your short head
To find the short head in your niche, all it takes is some market research — and that starts with a few questions.
What need are you trying to satisfy? How many people have it?
- Are there Facebook groups, subreddits, or other communities discussing the need?
- Can you see trends in Google searches?
- How many people are talking about the need on Twitter?
- Can you put a number on the total amount of people that would be interested?
Is there already someone doing it?
- Who’s the go-to authority? Is it a blog, a book, a platform, a podcast? How big is the customer-base? What’re their numbers?
- Can you do it better? Can you serve a subset of the market?
- What does the current authority suck at doing?
Market research is an entire profession with quantitative and qualitative methods to measure market size and value. But as a solopreneur, you rarely need to do more beyond researching the answers to the questions above.
You can conduct interviews, segment audiences, and look at secondary market data using little to no capital.
- You can promote your idea and hypothesis on platforms like Facebook, YouTube, Medium, and more to gauge interest.
- You can refine the interest through customer survey tools like Typeform, Google Forms, Twitter Polls.
- You can capture emails through services like ConvertKit and MailChimp, then experiment with open rates for your product.
- You can link Facebook or Twitter ads to “pre-order” pages to see if people genuinely want to buy what you’re planning on offering.
To create your software or media offering in a niche means finding your personal short head. Once you’ve invested the time and made a lever that’s large enough, you’ll become the authority. And without permission, the value you create will be directly proportional to the wealth you generate.
To be a one-person operation and not linearly trade your time for money, being a freelancer or a contract worker isn’t enough. It would help if you built leverage independent of the 1:1 ratio for time and output. Instead, you need to develop media or software that can work while you sleep.
But building it isn’t enough; it needs to be something valuable, and value is different for different people. Finding the right people and making something for them is the key. That’s how your content repository, application, or service will gain a position on the short head.
Producing haphazardly without the investment and research involved in finding and maintaining a niche will trap solopreneurs on the long tail.
We can sum it up in three points that solopreneurs should keep in mind to avoid this trap.
- Permissionless leverage means products that work while you sleep.
- Building the product in a niche will create value for the right person, and increase your leverage over time.
- That value will ensure you’re in the short head and not the long tail leading to a successful solo enterprise.
That’s how solopreneurs become one-person powerhouses. That’s how you can too.
Thank you and good luck,