Just saw Kevin O’Leary talk about customer acquisition cost, and damn he had a good phrase to describe it.
What he said was, “80% of the businesses fail in first 6 months because these businesses are not able to get their customer acquisition cost below the lifetime value, essentially meaning they are going bankrupt advertising. When someone figures out CAC and it is sustainable, that’s when investors like us come in and pour money in.”
Damn, that was the best thing I ever heard.
Figuring out CAC is a good enough invitation for investors. If you are a founder who can do sales, then CAC is essentially free. If you have something to feed yourself. If you are a founder who has clout, then it will get some sales done for you. So CAC is essentially free for you. That means if you are a founder with either sales ability or cloud, then you will get investors because the CAC is essentially free for you. And of course, your ability to sell will have a ceiling so you won’t scale beyond the limit, and your clout will have a ceiling so you won’t scale beyond the limit.
But either of them are good enough to have a low enough CAC to invite investors. Of course, ability to sell requires some proof. You will need to first have a product and sales, then you can invite investors. But if you are clout then you can get it right off the bat!
Essentially, even if you don’t know how to sell because it’s a hard skill, if you have clout, you have a business and an opportunity to get investors and scale it to the moon.
Well, clout comes from trust. I’ve explored how you build trust when it comes to 1:1 transactions. You just make it seem like heads, your weight tells you don’t lose much. That there is no harm in participating in this activity with me in shadier scenarios, it is like there would be harm, but less harm than any other option when you participate with me. How do you do that for a lot of people? How do you get clout? Surely the mechanics would be different. People follow an ideal on a mass scenario. You are an icon of what is already in them.
See investors love to hear ideas that are already CAC positive or will be CAC positive in the future. That’s why venture capital exists – they want huge TAM and a product that will hopefully get a product-market fit or already has one. They invest solely on the vibes of CAC positivity.
So own clout or the idea having the vibes of CAC positivity is important for investment.
I will just ignore the ability to sell as eligibility for investment for now. It’s way too small scale. Might as we’ll get a bank loan instead of equity.
Going bankrupt advertising. It basically means that you don’t have enough clout nor is your product credible enough that people are buying. Or you have both of them, but there is just not enough demand for the product that anyone would buy. So with low demand and high supply, you are just spending a lot on advertising to get it sold. So sales has two levers:
- The clout of the owner/brand
- The inherent demand of the product
When you have neither of them, you start compensating for it by spending more aggressively on advertising. Your CAC shoots up, and you can no longer afford anything.
I can manufacture sustainable clout faster and easier than I can manufacture a product with sustainable demand. That means I can generate sustainable demand pool easier than creating a product that has inherent demand.
Plus with clout, you can launch any other generic product with some differentiation in form or packaging, and it will do well. Without cloud, you have to make something so revolutionary that investors and people just throw money at you. The barrier to entry is very different. With clout, every business is just way less stressful. The clout of the owner gets you good business relationships. The clout of the owner plus product gets you good customer relationships.
Clout also gives you optionality that says, “Hey, if not this product, I can always launch another product because things don’t have to be so revolutionary.” Since I have contacts since people want to work with me, I don’t have to just work with you. But on the other hand, without it, if you are going the revolutionary product way, you are stuck in that product and you are stuck accepting terms from people.
The Two Paths Compared
Path A: Revolutionary Product (High Fragility)
Spend years building something 10x better
Hope the market wants it
Start customer acquisition from zero (high CAC)
Locked into one product (no optionality)
Weak negotiating position with everyone (suppliers, investors, partners)
Single-shot game: if it fails, you're done
Maximum stress at every level
Path B: Clout First (Antifragile)
Spend months building trust/audience
Ask audience what they want
Launch "good enough" product to warm audience (near-zero CAC)
Multiple product options (high optionality)
Strong negotiating position (people want to work with you)
Multi-shot game: Product A fails? Try Product B
Reduced stress across all business functions
Why Clout Wins on Controllability
You nailed it: clout is more controllable than product-market fit.
Clout = consistent effort + time (deterministic)
Product-market fit = timing + luck + execution (probabilistic)
You can engineer clout through content. You can't engineer a revolutionary product on demand.^from claude