the case nowadays. LA is filled with plastic surgeons. Attracted by the vast available wealth, a whole lot of medical students switched their major in the late 1980s and headed for Beverly Hills to make big money. But they discovered upon arriving that they weren't the only ones who had this incredible brain wave. By the end of the 90s the demand and supply relationship returned to a balance and today most plastic surgeons in LA make a normal surgeon's wage.
The plastic surgeons made more money because of a boom that happened across their whole industry. But as you'll see later in this book, it's possible to be completely independent of your industry and build a market of your own. Most people focus on the market that they are in when they think about demand and supply, but in doing so they miss out on an important part of the story. There are cycles in the economy whereby demand from “consumers” as a whole outstrips supply from “industry” as a whole. In these times, everyone seems to be doing well and there's an economic boom for almost everyone such as happened in the era known as the Roaring Twenties.
There are also cycles in your industry whereby demand for anyone in a chosen field of work will be outstripped by the available supply. This is known as an industry boom; for example, the dot-com boom in the late 90s, whereby almost any Silicon Valley company could raise millions for little more than an idea.
It's also possible for businesses and people who play an advanced game to go another layer deep and separate from both the economy and your industry and become a market on your own. You become subject to your own forces of demand and supply independent of anyone else. This is where you can become oversubscribed on your own terms.
The forces of demand and supply work the same when customers and clients see you as separate from your industry. However, you don't need very many people in order to become oversubscribed and to maintain a profitable price if you can get a few key things right.
Principle 2
Separate Yourself from the Market
Let's take a look at actors in the USA as an example of an industry in oversupply. There are over 450,000 people who have a Screen Actors Guild (Screen Actors Guild-American Federation of Television and Radio Artists) membership and there are barely 4,500 actors who make better than minimum wage from their acting income. About 99 % of actors can't afford to live on the money they earn from acting. Of the 1 % that does earn some money, fewer than 1,000 actors in the USA make over US$150,000 a year.
From an economic standpoint there is a massive oversupply of screen actors. So, there's absolutely no reason why a producer would pay a large sum for an actor. Yet, as we know, they do it all the time. For some actors, a fee of millions per film isn't only a possibility; people line up to pay it. These actors are separate from the market. They have made their own market.
George Clooney, Brad Pitt, Sandra Bullock, Cameron Diaz and Julia Roberts have millions of people who will go and see a film if they are in it. They have created their own market and they are oversubscribed. Their income isn't linked to “the” market; it's linked to their market.
Champagne brand, Moët & Chandon, has its own market. The price of other sparkling wine from the region doesn't affect them. Their bottles are always oversubscribed because people want to buy their brand.
Tory Burch handbags and shoes aren't affected by the market price of handbags. Burch made a billion dollars during the great recession while most other brand was on sale. Her brand is oversubscribed because she's built a special relationship with a new type of buyer.
Berkshire Hathaway shares aren't driven by the normal price of other stocks. They have a dedicated following of people who buy into Warren Buffet's philosophy.
You have likely assumed up to this point that your business must operate at the whims of the market as though your income is impacted by the economy and that your lifestyle is inextricably linked to what happens “out there” in your industry. If you're linking your business to the industry, to the market and to the trends that everyone else is following, then you'll continue competing on price with everyone else.
If you separate from the market and build your own market, you can generate as much money as your market will allow for.
You start this by building your own group of loyal fans. Cultivate a tribe of people who are loyal to your business, your products, your personality and your philosophy. Rally your own troops. Break those people away from the industry, separate them one by one from the market and make them part of something special.
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