Most endeavors in life are won or lost between the ears, and becoming a full-time author is little different. The human psyche is obviously a vastly complex (and strange) instrument of reasoning, so a full-scale cataloging of all its quirks would be neither possible nor useful. And I’d rather this not devolve into woo-woo positivity or typical non-actionable self-help BS. Thus, I want to home in on a specific type of mindset: how to think strategically.
While it may seem that these concepts apply exclusively to the business and marketing arena, do not be fooled: these are equally important when it comes to productivity and craft.
And we will begin by revisiting our old friend the 80/20 rule.
What the 80/20 Rule Really Means
It’s all well and good to internalize the basic principle behind the 80/20 rule, which is, of course, that a few key levers produce disproportionate outcomes. But in real-life, the ramifications of this principle can be both hard to accept and realize. Especially in the moment, when emotions are high and a book or marketing campaign is floundering.
Or you’ve tried to implement a behavioral change for the eighth time, only to falter again.
This is where the actual math behind the 80/20 rule becomes critical to understanding the calculus of success: 20% of your endeavors will succeed. 80% of them will be so marginal or useless as to seem like total wastes of time.
That means that 1 in 5 of book series will produce 80%+ of your sales.
1 in 5 ads will produce 80%+ of the results.
1 in 5 habits will be useful.
1 in 5 books you read will be valuable.
And so on. The key thing here to note is that 80/20 is fractal. This is a mathematical term that simply means the part resembles the whole. A puddle is a fractal lake, and a lake is a fractal ocean. Likewise, with 80/20, there is a 20% of the core 20% that is most important. This is known as the 64/4 rule, wherein just 4% of what you do results in 64% of the outcome.
That means 1 in 25 things you try will be giant winners. 4/25 will be decent winners. And 20/25 will be complete garbage.
Once you understand this, you realize that success is simply a matter of taking more quality swings. If you can release 18 books in three years, and another person releases two, you are harnessing the math in your favor and they are not.
This is why I set a stop loss of 30 books by age 30. A stop loss is an investment tool that sells you out of a stock position at a certain pre-determined point so that you stop losing money. This helps you avoid the sunk cost fallacy wherein you stay invested past the point where it’s prudent to do so, thus massively amplifying your losses.
A key misconception about the stop loss is that it should be set at the point where you can’t bear to emotionally lose any more money. That’s incorrect. The stop loss should be set at the point where your original premise has been disproven.
Here, the premise was: I have enough talent, skill, and work ethic to produce books that other people want to read and pay me for. Given the math of the 80/20 rule, if it didn’t happen by this point, it was unlikely to happen, and thus my original premise would have been disproven. The stop loss prevented me from making emotional decisions based on momentary ebbs and flows (e.g., a release bombing or a promotion not going as planned). And if it happened that I didn’t have the ability to do this, it helped avoid a scenario where I wasted 20 years of my life tilting at windmills.
Consciously, I didn’t think of the 80/20 rule. But it’s so ingrained in me that, subconsciously, I chose this point naturally. That’s the true nature of mindset: it’s not something you think, it’s something you are.
For the record, the numbers bear this out: I’ve released 25 books to date (23 novels and 2 non-fiction books). Two of the fiction series have done decently. One of the non-fiction ones has done decently. That’s about 3/25. Two things to note:
- 80/20 is highly influenced by skill. So if your craft isn’t up to par, then your hit rate with series will not be 20%. Conversely, if you have a lot of skill (branding, craft, ads, etc.) then you might be able to double your hit rate to 40%. There are limits to this, though. It is tempting, of course, to believe that we can tilt the odds dramatically in our favor with some secret. Some people have their breakout hit on their first or second book, then ride that for the rest of their career. Then everyone rushes to emulate their secrets. There is no secret; this is just the way math works. Taking swings is the groundwork of success here.
- It’s really based around series. Each book in a series does not actually increase your chances of success very much, because it’s essentially the same “swing”: branding, characters, series, and so forth. Thus, if the first few books do poorly, it’s rare that the series finds its footing later on or suddenly becomes a huge draw. This is not to say these series are worthless, just that they generally do not become major income producers and can become huge anchors to your career growth if you insist on feeding them with marketing funds and additional ill-fated books.
How many of us have 25 different series? Very few. This is why true breakout series are pretty rare, even among authors with large backlists. On the surface, this number seems discouraging, but I think it’s empowering. Because it frees us from the shackle of unrealistic expectations. 1/25 is hard to hit. 1/5? That is possible. And you can do very, very well with 1 in 5 series hitting more modest levels. But when you have that 1 in 5 hit, you need to optimize the shit out of it. Because not only will that series’ earnings grow, it’ll have a halo effect that lifts the rest of your modestly performing backlist with it.
Too often, I see authors stall their progress by working on low-earning series, thus allowing their best performer to die. This is an egregious, career-stalling (or even killing) mistake that I have made multiple times. By understanding the full ramifications of 80/20, however, you’ll know that when you have a series that works…it’s time to hit the accelerator.
For further exploration of 80/20’s fractal ramifications, check out Perry Marshall’s excellent 80/20 Sales & Marketing.
Play Poker, Not Roulette
Many of us possess an inherent belief that skill should be rewarded. Over time, this is true. But even when you do everything at a high level, you can’t guarantee a win. In fact, you will still fail (or come up short of expectations) more often than you’d like.
This can feel shockingly unfair and uncomfortable in the moment.
One of the hardest things to come to terms with in self-publishing is variance. As that word likely suggests, that means results in this business are not constant; they vary. Even with a good process and marketing strategy, a book can still flop. And when we put a dollar into our marketing expecting two, but instead get zero, it can be a jarring experience.
Indie publishing is ultimately a probabilities game. By improving your skills in the core three areas—productivity, craft, and marketing—you can significantly raise the probability that each book you release will be successful. But that probability will never reach 100%.
Our brains aren’t great at intuitively grasping probability. They’re pattern recognition machines tuned to look for cause-and-effect. This is a basic hard-wired survival instinct: if Bob ate the red plant in the forest and died, we avoided eating red plants, too. This cause-and-effect relationship is later reinforced by society: we do good work, we receive a reward (grade, job, promotion, praise, etc.).
Being able to identify these types of cause-and-effect relationships is a big reason why we’ve survived for thousands of years.
But complex systems don’t work like that. Yes, there are many books and articles promising explanations to massive problems. These are alluring precisely because we want answers to big questions. The problem?
Simple explanations to complex issues are almost always fiction.
Self-publishing—and marketing in particular—doesn’t follow set patterns that work all the time. Often what looks like a pattern is, in fact, noise. Or the cause of a marketing campaign’s success or failure can be totally opaque, offering no lessons at all. Or, most confusingly, it can be completely random: perhaps Amazon picked the book up for a deal we didn’t know about, or a popular author shared our title, thus blasting it into the ranking stratosphere.
Thus, even marketing campaigns designed using the same strategy and principles can produce wildly different outcomes. Because human behavior is hard to predict.
This leads some authors to oscillate to the other extreme: that skill hardly matters at all, and that self-publishing is all luck. That conclusion, however, would be incorrect.
Instead, this game is a combination of luck and skill akin to poker.
A pro-level poker player will win more often than he loses against amateur players. That is because he has an edge—that is, his skills are higher, therefore his probability of winning is higher. But because of variance (e.g., the inherent randomness of the cards he’s dealt and the unpredictability of the people playing), it’s entirely possible for a novice to beat the best player in the world at a hand. It’s even possible (though not likely) for them to win an entire game.
This is much like someone’s first novel becoming a lightning strike success with minimal marketing. These stories get a lot of ink and internet traffic precisely because they’re so uncommon. That can make this path seem like the norm (or even likely). It isn’t.
A counter-argument might be that such a method is not impossible. I wouldn’t disagree. You can, after all, also head over to the roulette wheel, bet it all on black, and emerge a wealthier individual. But this isn’t a strategy; it’s a wish. A losing wish, over time, given the probabilities.
And what people often ignore is that your career is not defined by a single temporary success, but successfully surviving (and thriving) long-term. $100,000 a month in royalties can turn into $1,000 as that surprise success is overtaken on the charts by next month’s breakout hit. The real measure of skill, then, is whether the percentages remain in your favor after playing thirty games of poker—or publishing your thirty-seventh novel.
That’s because only time—and playing enough hands—can smooth out variance and reveal our actual skill in games where variance is a factor. If we are truly skilled, we will come out ahead. If we are not, then we won’t. But we must publish enough books (recall our discussion of 80/20 above) and do enough marketing to find out.
And the best part of this approach? With each progressive book and marketing campaign we create, we further tilt the odds in our favor by improving along the way.
You want to look for asymmetric upside, where the upside massively outweighs the downside risk. This also comes from investing, where it’s used to describe investments with unlimited upside but capped downside. In movies, by contrast, it’s common for characters to go all-in or “burn the boats.” This is an exceptionally dumb strategy because it contains massive risk: if things don’t work out, you’re screwed. Game over.
In other words, there’s significant risk of ruin. To have a long-term career, first you must stay in the arena. Yes, you’ll have some down years. You may even be down for the count at one point or another. But if you properly manage your risk, you can survive. And you do this by not just avoiding scenarios that can wipe you out, but properly assessing upside and mitigating downside.
There are three components to identifying opportunities with asymmetric upside:
- What is the upside and downside here? (expected value)
- What are the approximate chances of X, Y, and Z happening? (expected value)
- Based on this expected value and my current cash flow, how much time and money should I invest? (bet sizing)
With upside, we need to filter our decision-making through the lens of expected value. Often, people look solely at what they could make – this might make me $10,000! But this approach fails to factor in the potential probabilities of other outcomes – both positive (but more modest) and negative.
Expected value solves this by weighting the probability of various outcomes. The end result is that you get a more accurate assessment of the opportunity’s actual value. Note that, in the real world, you don’t know actual probabilities. And when it comes to books, they aren’t remotely calculable. Thus, this is a mental piece of software that you run to screen for high-upside opportunities. Our goal is to develop a good radar for high payoff opportunities that may have relatively low probabilities and thus may seem unappealing to other people.
In other words, this is not about how often you win, but the magnitude of the win. This is critical, because people tend to focus on winning percentage rather than overall profits. You can win 100% of the time (i.e., always be profitable) and make 1/10 of someone who wins 30% of the time.
In the real world, winning big is far superior than winning a lot. This is not football, where if you score 300 points in a game, it counts as just one win. If one book or launch generates $300,000 in revenue, and the other five lose $5k, you end up massively ahead.
While this is about mindset not numbers (you cannot calculate probabilities for book marketing in the real world), a little math can be useful for illustration purposes, so here’s an example:
- Let’s say you have a 30% chance of making $100,000 and 70% chance of making $10,000.
- Your expected value would be (0.3 x $100,000) + (0.7 x $10,000) = $37,000.
Let’s use an actual example, based on my Demons & Bounty Hunters Box Set. I want to be very clear: these probabilities are 100% pulled out of my ass. This is just an illustration of my underlying thought process, with approximate values attached to show my confidence in various outcomes occurring:
All numbers profit over a six month time frame. Assuming ad budget of $5k.
- 5% chance of making $50,000
- 10% chance of making $40,000
- 15% chance of making $20,000
- 30% chance of making $10,000
- 30% chance of making $5,000
- 5% chance of breaking even
- 5% chance of making -$2,000
To calculate the EV: (0.05 x $50,000) + (0.10 x $40,000) + (0.15 x $20,000) + (0.30 x $10,000) + (0.30 x $5,000) + (0.05 x 0) + (0.05 x -$2,000) = $13,900 expected profit over six months.
Many people here would be fixated on the prospect of potentially losing $2,000, and disproportionately weight that in their decision making. And, to be clear, if you did not have $2,000 to lose, this would be a poor bet to take. Because again, while we want to seize high upside opportunities, our number one directive is simply to stay in the game. Again, recall risk of ruin: any bet, even if the odds are in your favor, can kill you if you’re all-in or over-committed.
Which is critical for considering the other end of the spectrum, too: we do not want to focus on the rare unicorn case ($50,000 profit) and mistakenly spend way too much chasing an unlikely outcome.
You manage downside risk through bet sizing. Don’t overinvest too much time or money into any one project. The book business is extremely unpredictable and volatile; it’s hard to tell what’s going to be a breakout hit or a dud. By properly managing your cash, you ensure that you don’t vaporize a bunch of money on a losing book, while also ensuring that you have extra cash free to double down on the rare golden opportunities.
This distribution follows the 80/20 rule: 20% of your books (i.e., one in five series, basically), will be responsible for 80% of your income. It could be more – one series could produce 95% of the income.
But you won’t maximize this series’ potential if you split your bankroll evenly between every book you have. The biggest winners should receive the lion’s share of the ad dollars, if not all of them until you see diminishing returns. Naturally, you never want to spend every dollar you have; keeping cash in reserve (called dry powder) helps you not only seize unexpected opportunities but also provides safety for a rainy day. And there will be plenty of those as an author. That’s simply reality.
- Go through your catalog and identify your 5 most profitable titles or series. Are you spending most of your marketing time and money on them? And are you writing more books in those series or worlds? If not, why not?