The "Do Not Lose Money" Rule: A Simple Guide to Unfailing Entrepreneurship

Introduction

Hello everyone, I'm Ray. Today, I want to share a rule that helps me in entrepreneurship to never fail. I know this sounds exaggerated—how can you not fail in entrepreneurship? Let me explain.

The Origin of the "Do Not Lose Money" Rule

Recently, in an interview, I was asked about my failures as an entrepreneur. After all, failure is the mother of success. I thought about it and realized I hadn't really failed much. The interviewer was a bit puzzled because I hadn't followed the usual script. They then asked for my advice to entrepreneurs, and I said just one thing: "Do not lose money." They laughed awkwardly, seemingly thinking I was being flippant.

Obviously, if you don't lose money, you won't fail. Everyone knows that. But I wasn't being flippant. This seemingly empty phrase has a deeper meaning that many don't understand. It guides my every step in entrepreneurship.

How "Do Not Lose Money" Helps You Succeed

This video will explore how the "Do not lose money" rule can help you succeed in entrepreneurship through my stories and thoughts. I've been an entrepreneur for over a decade, but I'm not a business genius. I haven't created a listed company or a Fortune 500. I'm just a small business owner who has managed to support myself without initial capital, a one-person enterprise making a living online. That's why I haven't discussed entrepreneurship much on my channel, despite talking about money. But that recent conversation reminded me that my experience might help people like me. Not everyone gets venture capital. This video is a simple guide to not failing when starting from scratch as an ordinary person.

A Quick Thank You to Interactive Brokers (IB)

Before we continue, I want to thank my long-term channel sponsor, Interactive Brokers (IB). I've used IB for years for my US stock trading. IB has a great reputation, has won many awards, and is powerful. Transaction fees are low, almost negligible. For non-US users like me, IB has excellent currency exchange with low rates. It even pays interest on cash in eligible accounts. I highly recommend checking out IB using the link in the comments. Clicking the link benefits me and supports my work.

The Buffett Connection and Downside Protection

Let's discuss the origin of "Do Not Lose Money." Many know it comes from Warren Buffett, who said, "The first rule of investment is don't lose. And the second rule of investment is don't forget the first rule." While understanding this in investment isn't the focus now, I want to return to the phrase itself. Why is it meaningful to me? There are two points.

Downside Protection

Firstly, "Do Not Lose Money" is essentially about downside protection, an anti-goal. An anti-goal is what you want to avoid. As Charlie Munger said, "Invert, always invert." He joked, "All I want to know is where I'm gonna die, so I will never go there." We don't know where we'll die, but for a company, it's easy: companies die from losing money. If a company dies, there may be no second chance. It's that simple. Therefore, "Do Not Lose Money" is the first goal of entrepreneurship.

The Razor Principle

More importantly, this phrase acts as a razor, helping me make the right decisions in every aspect of entrepreneurship and investment. A razor is a decision-making principle in philosophy that cuts away complex explanations or unnecessary steps, simplifying the process to reach a final decision or judgment. These razors are often catchy. Buffett's quote is similar to a razor from Fight Club. Other examples include Occam's razor ("Entities should not be multiplied without necessity") and Hanlon's razor ("Never attribute to malice that which is adequately explained by stupidity").

We've heard of these razors, but many treat them as thought-provoking quotes, not decision-making tools. To truly wield a razor, you need more than just the razor itself; you need a whole system of strategies and a worldview to support it.

How "Do Not Lose Money" Guides My Entrepreneurship

In entrepreneurship, "Do Not Lose Money" means three things to me:

• Operating without initial capital (空手套白狼)
• Using existing platforms (借机生蛋)
• Setting correct measurement standards

1. Operating Without Initial Capital (空手套白狼)

This doesn't mean spending other people's money. I mentioned "Do Not Lose Money" on Twitter, and someone criticized me for spending investors' money without consequences. That's a misunderstanding. "Do Not Lose Money" means not losing money, and investors' money is still money. I'm referring to making money without funds, relying on other resources. Many complain about lacking capital for their entrepreneurial ambitions, but I say if you can't operate without initial capital, giving you capital is useless. The ability to make money is more important than capital. This includes sales ability, access to information, and the ability to create other assets.

Example: My first job was in sales. I was in college, and my family was poor and couldn't afford tuition. There was a trend of college students starting businesses. A classmate with money had an idea to wholesale roses and silver jewelry to college couples. I joined, even though I couldn't afford the capital. I had time, legs, and a mouth to make money. I went door-to-door, pitching products, often facing rejection. Sometimes, I'd talk with a customer for an hour, and they'd only buy one flower. Once, on Christmas Eve, I delivered flowers to a classmate going on a date, but I was late due to traffic and got scolded. I felt strangely cool because I was making my own money while others spent their parents' money. I knew this ability would stay with me.

Later, I did a lot of sales: selling computers, courses, even fundraising. Fundraising is essentially sales. My YouTube videos are also a form of sales. Recently, I've noticed many independent developers on Twitter with good products but lacking sales skills. They know this weakness but get caught up in technical debates instead of improving sales skills. This is because sales is a learned skill, not a natural talent. Skill acquisition takes time. Many try and give up, thinking they lack talent. It can be difficult to switch to sales after years of technical success.

My advice is to learn sales early. Sales ability allows you to operate without initial capital and is a direct way to make money. It's leverage that benefits you for life. If you're a student, your first job should be sales, not tutoring. You're young, have less pressure, and are adaptable. If you're middle-aged, it's not too late, but understand it takes time. Do you want to complain in three years that it's too late, or start now and have that skill in three years?

Operating without initial capital is about leveraging non-capital resources to make money. Sales and information access provide such leverage. My early career and entrepreneurship in TOEFL/IELTS training thrived on information gaps. There was little original content, and even textbooks were copied. Many English teachers succeeded because of the information gap surrounding English. Even now, this gap creates value for me.

Many say AI eliminates language information gaps, but I disagree. Using another language for thinking and empathy is an ability that brings many advantages. This leverage helps us create other valuable assets like articles, books, videos, code, etc. These assets have leverage because they can be infinitely replicated to serve countless people without capital. You won't lose money starting a business with them.

2. Using Existing Platforms (借机生蛋)

This means using existing platforms to build a money-making business. The platform can be someone else's or your own. A common mistake is when successful employees overestimate their ability, quit their jobs, start businesses, and fail miserably. This is because entrepreneurship is a 0-to-1 process. Employees are only good at a small part of this on their existing platform. They haven't experienced the other aspects of the 0-to-1 process or mistakenly believe they have the ability. They may even naively think they'll enjoy the process. When they start from 0, they realize the support systems and resources from their old platform no longer exist. They then realize their former boss wasn't as incompetent as they thought.

I recommend reading The E-Myth Revisited, which calls these entrepreneurs "technicians turned managers." When a technician on a platform decides to start a business because of their work excellence, it's like opening a dumpling restaurant for a plate of vinegar. The vinegar and the restaurant are completely different. To start a business and not lose money, you need to realize the advantages the platform gives you and leverage it to complete the 0-to-1 process. That's what I mean by using existing platforms.

Example: I said I was a TOEFL/IELTS teacher, and my initial entrepreneurial goal was to open a school. So I used the existing platform to create opportunities to complete the 0-to-1 process. In Toronto, we needed to start an IELTS training department from scratch, so I took the lead. When we needed to open a new high school, I created opportunities to participate fully, meet people, and learn valuable knowledge. When online education emerged, I volunteered to build an online school, even though I knew nothing. I hired a software development team from a third-party platform (E-Lance, now Upwork) and built the website, teaching system, login management system, and payment system. The teachers didn't know how to film videos, so I learned filming, sound recording, editing, and production, and helped them. I even made the school's promotional animations myself. That's how I learned video editing. When I left that school, I had learned the 0-to-1 process of opening both physical and online schools. My side business was already making money. Soon, I opened my own online school. That's what I mean by using an existing platform.

Once you have your platform, you can leverage it even more to create new businesses and growth points, finding new opportunities and trying new directions. Your next venture can grow from the existing platform. For example, my YouTube channel and community website are extensions of my original platform. Entrepreneurial ability is a 0-to-1 ability and experience. Utilizing existing platforms to gain this experience greatly reduces the chance of losing money.

Some might question whether this takes advantage of the platform. Those with this mindset may not be suited for entrepreneurship because it reflects a scarcity mindset, treating entrepreneurship as a zero-sum game. When you use an existing platform to do 0-to-1, you're also creating value for the platform. It's a win-win. This reflects the essence of entrepreneurship: creating value. It's an abundant mindset, not a zero-sum game.

If the platform doesn't give you 0-to-1 opportunities, you can still use the stable income and security it provides to work on side projects outside the platform, trying 0-to-1. I want to emphasize this because there's a narrative that side projects are a myth. Young people should focus on their main job and become experts to succeed on the platform. But I disagree.

Side projects aren't a myth. Those who oppose them don't understand their true meaning. Side projects aren't just for earning a bit of money. They give you space to try 0-to-1 and open up future possibilities. Side projects outside the platform offer a unique benefit: a real environment to learn and grow from mistakes.

When growing up, many of us were told by teachers not to make mistakes because they'd be recorded and follow us forever. Working on a platform is similar. If you try 0-to-1 and fail, it's recorded in your resume. These failures become obstacles to promotions or new jobs. But outside the platform, you have the main job as a safety net. Failure doesn't matter. You can still learn and gain experience. These lessons aren't recorded; they become wealth in your mind. That's true learning from mistakes. You might not have this opportunity within the platform, or the cost of failure is too high. Trying things outside the platform means you don't lose capital, and you gain experience if you win. Isn't that the best practice of "Do Not Lose Money?"

3. Setting Correct Measurement Goals

Doing business is about profit and making money. That seems obvious, but many entrepreneurs forget this and focus on other goals, like having a nice office, a big team, attending many events, receiving coverage, getting funding rounds, having high valuations, and high growth rates. You get what you measure. You can argue those things relate to profit, but they're not profit itself.

Following "Do Not Lose Money" means minimizing unimportant things and processes that don't reflect the essence of the business. Focus on profit. The faster you become profitable, the less likely you are to lose money. It's that simple.

This reflects in me in three points:

• Solving My Own Problems: Is my venture solving my problems and making me the first beneficiary? The most dangerous competitors aren't industry giants but entrepreneurs solving the same problems for personal reasons. Using solving your problems as motivation helps you become profitable and less likely to lose money. When you solve your problems and needs, you've already won. Even if the venture isn't very profitable, it benefits the current business and platform. This is downside protection. Solving your problems also helps you accurately identify problems and needs, helping others facing the same issues and turning it into a business. Whenever I have a business idea, I ask myself what problem I'm solving for myself. Even when making a video, I want to be the first beneficiary, learning new knowledge, understanding a topic, developing a skill, getting sponsorship, or recruiting members for the community. That way, traffic isn't the only goal. Internal revenue and conversion rates are also my metrics. Even if traffic isn't ideal, I still gain something and don't lose.
• Finding The First Real Customer: Can I quickly find the first real customer? In my years of entrepreneurship, if I can find the first customer, I can find the hundredth. This customer must be a real customer who is willing to pay and lets me profit, not someone who relies on free services or low prices. The first real customer is an endorsement of your business model and a sign that you're doing things right. Focusing on quickly finding this first customer is extremely important to me.
• Simplicity: Is my business simple enough? As a YouTuber, I often receive sponsorship invitations. Many emails start with "Dear Money XYZ Team." This makes me laugh because I don't have a team. It's just me and my wife, a one- or two-person enterprise. Unlike many content creators, I didn't try to build a team before making a few videos. I follow a minimalist entrepreneurial principle. Entrepreneurship is like personal finance: you should be frugal and save where you can. If I can work at home, I won't go to a cafe. If I can go to a cafe, I won't rent an office. If I can rent an office, I won't rent a fancy studio. If I can use software to solve problems, I won't hire someone. If I can hire a freelancer, I won't hire a full-time employee. This reflects the "Do Not Lose Money" principle and downside protection.

Some might say this is too conservative and that fearing losing money limits development. This is what I want to share about minimalist entrepreneurship and one-person enterprises. Minimalist entrepreneurship prioritizes profit, not scaling. If the group and market you serve require your business to reach a certain scale, then a one-person enterprise is no longer suitable. You should scale when necessary. Be careful not to scale for the sake of scaling or scaling things that can't be scaled.

For example, with being a YouTuber, my editing can be scaled, and commercial orders can be increased. But me, the creator, is a bottleneck and can't be scaled. Even if I don't sleep for 24 hours, my inspiration and creation are limited. You can hire someone to write scripts for you, but that's not my creation. It's a different business model and not what I want. When the creative bottleneck isn't solved, scaling is a waste and can distract from the energy of creation. Now, I'm starting to build a team. I have my editor, and I'm recruiting a community operations team because community operations are affecting my energy, affecting creation and community. Scaling and systematizing become meaningful for the natural growth of my business.

There's much to discuss about one-person enterprises and minimalist entrepreneurship. I share many details and experiences in community podcasts and live streams. I'll organize and share them in the future. I recommend two books: The Minimalist Entrepreneur and The E-Myth Revisited. They'll help those who want to start a business. The Minimalist Entrepreneur will also be a reading selection.

Conclusion

That's my simple sharing of how an ordinary person can start a business without losing money. Remembering "Do Not Lose Money" alone won't guarantee success. We should treat it as a decision-making razor and build a system that allows us to wield it, including a worldview. The true meaning isn't just the phrase but all the choices and decisions we make to achieve it. This applies not only to entrepreneurship but also to investment and life.

This video was originally about how "Do Not Lose Money" helps me avoid failure in investment, entrepreneurship, and life. But when I wrote the entrepreneurship part, it was already over 7,000 words. I have a razor for YouTube content: if a script exceeds 5,000 words, I split it into different videos. In the future, I'll share the meaning of "Do Not Lose Money" in investment and life. If you want to see that content, please like, comment, and subscribe. See you next time. Bye-bye.