Rules of the Scrappy Capitalist: Rule 1 – Become an expert at spotting opportunity

The old guard of capitalism is dying out. They have relied on their name or where they went to school or the “old boy’s network”. But the web is the great leveller and today’s success stories are people who don’t have the pedigree or daddy’s money.

Scrappy capitalists are fierce fighters who succeed in business, the capital markets, or in real estate. They claw their way to the top using equal parts skill and bravado.

It doesn’t matter where you’ve planted your flag — in business or the markets — you’re a scrappy capitalist if you follow these 6 rules:

SCRAPPY CAPITALIST RULE #1: BECOME AN EXPERT AT SPOTTING OPPORTUNITY

Money changes hands at the intersection of supply and demand. Successful entrepreneurs and investors find supply/demand imbalance and they make money by solving it. (For example: Entrepreneurs build businesses that sell products or services into that demand; capital market investors buy stock when demand is low and supply is high; real estate investors find properties where rental demand is high… but there are other examples, too).

Scrappy capitalists don’t just rely on blind luck to stumble onto a trending demand, they become an expert in spotting opportunity. They use traditional research, social networks, search tools, testing, and anecdotal evidence to find the supply/demand equation and they look for imbalance that can work in their favor.

They develop a formula that works for them and they continually refine the formula over time. This formula becomes one of the most important assets in their business. (An example of a formula might be the fundamental and technical events that tell a stock market investor when the price of a stock might go up or down).

Want to become an expert in spotting opportunity? Here are some tips:

  • Use Google’s Wonder Wheel to choose a topic, industry, category, geographic location, (etc.), and explore related ideas.
  • Use Google’s keyword tool to find what related searches people are performing. Look for long-tail keywords to be more helpful here.
  • Use Quora to find what questions people are asking most often, and which questions have the most answers (potentially lots of suppliers for the demand) or only a few answers (potentially only a few suppliers for the demand).
  • Connect on forums and social networks related to your particular focus. For example, LinkedIn might be good for entrepreneurs, StockTwits might be good for capital market investors, and Bigger Pockets for real estate investors…. but there are others.
  • Use Twitter’s search tool to find real-time sentiment on a particular topic.
  • Review a website exchange site like Flippa to see what kinds of websites people are buying or selling.
  • Build a database of industry blogs and watch what topics are being blogged about most often. (Google Reader is really useful for constant scanning).
  • For capital market investors, FinViz is a great visual tool to see movement in stocks.

These are just some of the many ways a scrappy capitalist can spot new opportunity. Bookmark these sites and then spend a bit of time every day combing through them to find opportunities where there’s a supply/demand imbalance.

Stay tuned. I’ll reveal the next rule of the scrappy capitalist tomorrow.