Startup Game, Crack Game Ain’t That Different Ya Know?

 

“Rap game, crack game ain’t that different ya know?
-Drake, Come Thru

It’s 2016 and unless you live under a rock, you’ve probably heard of brands like Vizio, H&M, Zara, and Xiaomi. They’re very successful companies that make billions of dollars every year.

What about Blue Magic — does that ring a bell? It’s a brand of heroin created and sold by drug kingpin Frank Lucas, who amassed a fortune in the 70s selling heroin to all of New York City. His prosperous career and eventual demise was chronicled in the 2007 blockbuster film American Gangster.

These brands may seem incredibly disconnected, but there’s no doubt that they all share one characteristic — massive success. So how did they do it? And what can we learn from them?

If you look a bit closer, you’ll find that they’re actually all employing the same core business tactic adapted to their own markets. Frank Lucas explains this plain and simple strategy in American Gangster:

“My company sells a product that’s better than the competition at a price that’s lower than the competition.”

It seems so obvious, yet there are very few companies that successfully pull this strategy off in a massive scale. And the ones who do experience explosive growth and revenue.

The Business Model

The most prominent examples of this business model hail from China, where companies like Xiaomi and LeEco have gone from being nonexistent to dominating the consumer electronics market in 3–5 years. They employ the almost stupidly simple business model of selling high-quality products at low cost, with a trustable brand and great customer support. It comes at the sacrifice of extremely thin profit margins, but the sheer volume of sales and revenue (and sometimes huge outside funding) that they’re able to generate make up for it.

Now armed with billions of dollars in cash, they then quickly expand into new products and markets — prioritizing breadth over depth. While traditional, slow-moving competitors are busy squeezing every cent of profit from their supply chain, these bullish companies work with dozens of suppliers to stay lean and focus on product expansion. All of this happens really fucking quickly, and the next thing they know, they’ve become a massively adopted brand.

With all that said, this business model has its limitations: it only works in highly commoditized markets, where the price and quality of goods are all relatively the same. This allows any slight deviation (like prettier packaging, lower price) to get the product noticed and picked up. Companies like Apple can pull off extremely high prices because their products are simply above the standard deviation in terms of quality.

Frank Lucas

Now let’s turn to Frank Lucas and his heroin empire, which oddly serves as one of the most effective examples of this classic business model. As heroin is as pure of an example of a commoditized good as can get (where there are very few established “brands” or variations such as flavors or strains), it happened to be an extremely effective market for the tactic. Although the fortune Frank Lucas amassed was nothing close to what Pablo Escobar or George Jung had, he was able to employ this model to go from being a local drug dealer’s driver to ruling New York’s heroin market for nearly a decade. And who knows what he would’ve been able to pull off if his career wasn’t cut short (in part due to his $50,000 chinchilla coat).

Blue Magic was introduced into the streets of Harlem in the late 60s, and quickly spread throughout the city through tightly controlled distribution outposts that Lucas employed his brothers to operate. Lucas wanted to make sure everyone could access his product, both in terms of availability and price. He’s most known for cutting out all middlemen in the supply chain and buying straight from the source (opium plantations in Southeast Asia). This move not only allowed him to severely undercut competitors, but also allowed his supply to be extremely pure in quality (traditionally, drugs get diluted as it passes through multiple parties in the supply chain from source to customer). Lucas also understood the power of consistent brand experience, making sure each packet labeled with a Blue Magic stamp stayed consistent in quality and form before it reached anyone.

The Breakdown

So what can we learn from all this? I’ve tried boiling everything down to the 5 pillars that form the American Gangster Business Model: Low Cost, High Quality, Strong Branding, High Consistency, and Prevalent Marketing.

Low Cost

“Your price is way too high, you need to cut it!”
-O.T. Genesis, Cut It (ft. Yung Dolph)

  • The price tag is what grabs the attention first, but only within the context/presence of other products of similar quality.
  • Example: Blue Magic sold for a fraction of the cost of its competition.
  • Example: Xiaomi’s feature phone Mi 5 shares the same specs as Samsung Galaxy 7, for a fraction of the price ($450 vs. $680).

High Quality

  • Quality actually doesn’t need to be incredible, but good enough to pleasantly surprise customers.
  • Quality can be perceived (through effective marketing) or genuine.
  • Example: Blue Magic heroin was 98–100% pure when it arrived from Southeast Asia (Lucas had to cut it down to keep his customers alive, but it was still double the purity of his competitors’ when it hit the streets).
  • Example: Xiaomi’s devices feature extremely high quality design, and are manufactured at Foxconn, the same factory that produces Apple products.

Great Branding

  • A product’s branding is the only thing that customers will remember it by (and share with others). Having a memorable, relatable, localized brand and name is very important.
  • The product needs to have at least one main visual/aesthetic for people to recognize it by. Often times this is the logo, sometimes it’s the packaging (i.e. Coca-Cola and its red cans).
  • Example: Blue Magic was sold in small blue packets with a signature stamp on them.
  • Example: Anyone can recognize a McDonald’s from a mile away by its signature yellow double arches.

High Consistency

  • The product experience (quality, price, aesthetic) should be incredibly consistent. Big franchises like McDonald’s and Starbucks do this very well, even down to the exact furniture and height of the payment counter within each of their thousands of stores.
  • Example: A prominent scene in American Gangster depicts Frank Lucas confronting and threatening one of his distributors for diluting his supply while still selling under the Blue Magic brand. Lucas insists that he can still sell his diluted supply, but strictly under a different brand to avoid tainting the Blue Magic name.
  • Example: Apple’s product design is so consistent that anyone can instantly identify it just from glancing at a product (or packaging).

Prevalent Marketing

  • In a highly commoditized market, the only differentiator a product can have is its brand, look, and price. (If a product is so drastically different than its competitors, it has enough leverage to be more expensive and still sell).
  • At this point, the product just needs to get in front of as many eyeballs as possible (via marketing, advertising, partnerships, etc).
  • Example: Although Frank Lucas couldn’t blatantly go around advertising his drug everywhere (due to obvious reasons), everyone knew of Blue Magic and it was frequently seen/used at celebrity parties.
  • Example: Nike spends billions of dollars on brand awareness advertising, plastering its swoosh logo onto every imaginable form of media.
  • Example: Initially, Xiaomi actually did not believe in spending a lot of money on advertising & marketing, instead relying on word of mouth via loyal customers. However, this has recently been backfiring, as competitors such as Oppo and Vivo are spending millions of dollars on offline advertising and stealing Xiaomi’s dominant market share.

And there you have it, the 5 pillars behind the American Gangster Business Model. It’s only one of so many different successful models that exist today, but one I consider to be the most powerful. Successful execution is a whole another story, but like, it’s not like selling drugs is any different than selling consumer products, right?

CREATING a Problem Artificially, Then Offering the ONLY Solution = Monopoly

Yesterday I bought Peter Thiel’s book Zero to One per my friend’s (strong) recommendation. Thiel certainly spews a lot of cool insights in it, and one of his most interesting points from what I’ve read so far is this:

The only true way to succeed as a business is to achieve monopoly (contrary to basic economics, which states that the ideal situation for any business is absolute competition/equilibrium).

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The CHILL Lifestyle™ Theory

Today I got in a car accident. I was stopped at a stoplight in downtown Chicago with my whole family in the car when an SUV blindly hit the back of our sedan. It wasn’t a huge accident and didn’t cause too much car damage, but it was enough to give my mom a whiplash and hurt my back.

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Brainjacking: A Step Beyond VR, A Step Too Early

One of the most memorable things that I learned from Psych 1 class my freshman year was the concept of perception and how our brain manages to turn everyday sensory input into thoughts and emotions. If I were to take whatever I learned and try to fit it into a new (probably not, but I’d like to think so haha) context of objectiveness and subjectiveness, we get the following:

Our memories and emotions are the result of raw objective sensory input (sight, sound, touch, etc.) after they’ve been processed through a subjective perception filter.

To express more visually:

Objective sensory input –> Subjective perception filter –> Thoughts, opinions, memories, emotions

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Sebastian Park: Identity as Medium

Sometime last November, I got unusually high off caffeine while at work, and somehow had this epiphany / crazy idea: What if for one of my art projects, I created and lived as a completely different identity – an alter ego as a canvas? Basically, what if I tried to live two completely different lives at once? Haha..

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5 Steps of Learning Any Skill in the World

[Migrated & extended from a personal entry in my Evernote from 12/23/2015]
 
I believe that the average human has the ability to learn and do anything in the world. It’s uncommon for people to fully exercise this power and truly learn anything (skills, etc.) in the world because 0) they don’t realize this potential (REALIZATION), 1) they don’t find it necessary to exhaust the attention/time/money/effort in order to do so (MOTIVATION), and 2) because they lack the proper/efficient training to learning new skills (EDUCATION).


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Hello World!

I’ve been getting into writing (essays, journals, random thoughts) for a while now, but haven’t really published anything publicly. I’ve found that writing is a great way to record memories/emotions/thoughts/goals/etc in a way that pictures or even videos can’t.

Anyways, I wanted to start an actual public-facing blog to dump some of my thoughts and musings onto. To start it off, I’ll just migrate some of my previous essays from my personal Evernote as individual posts.

There’s not much of a big goal/reason behind starting this blog besides trying to increase my presence on the Interwebs (coincides with my new KIM/OS website launch) and having a place to dump my thoughts and opinions for others to agree with or argue against.

It was also partly inspired by recent events when I stumbled upon other people’s blogs and realized I could learn so much about that stranger through their writing.

Anyways, here goes.

Side note: I chose to host this blog on my own domain/server instead of using Medium/Tumblr/etc. because I think there’s something special and extra-personal about self-hosted blogs. Medium has its own benefits such as better exposure, but hosting it myself makes me feel like it’s truly *mine* and there’s definitely something very nostalgic/romantic about self-published WordPress blogs (like, it’s so 2006!).