Planning for Unpredictability with Daniel Vassallo

Published November 23, 2021

Planning for Unpredictability is episode 16 of The Gumroad Podcast, featuring Independent Creator and Gumroad's Head of Product, Daniel Vassallo. I found it very informative so I decided to take notes. This blog post contains my notes on the episode.

Daniel Vassallo created Userbase and launched several very successful Gumroad products, including "The Good Parts of AWS" and "Everyone Can Build a Twitter Audience". In 2019, he left a job paying $500,000 at Amazon to work for himself.

The unpredictable world

When jumping from the predictable world of employment to self-employment and being a creator on the Internet, there is much more uncertainty and unpredictability involved.

Working very hard on one thing works well in the predictable world, but working hard is not enough in the unpredictable world. Randomness, chance, and unpredictable events play such a big role in the unpredictable world. Therefore, succeeding in the unpredictable world requires a different strategy.

Nassim Taleb, Tim Ferriss, and Art De Vany speak of the role of chance in life and business. Thinking in this way has been beneficial for Daniel.

Daniel found that diversifying his income has helped to increase his odds of success. It has also given Daniel the psychological benefits of motivation and productivity.

Daniel actually had no concrete work plans for November 2021. There were a few things he had to get done, but then he had the freedom to jump into a few random things. This allowed him to take advantage of spontaneous opportunities that presented themselves.

Two and a half years ago, Daniel had no social media experience. He hated social media. Today, he finds it extremely useful and even has products available that teach people how to use social media. This shows how life can take you down unexpected, yet amazing roads if you're available and willing to go down them when they present themselves.

Unpredictability scares us, but Daniel suggests that we can use it to our benefit to find the right work-life balance, as well as new sources of energy and inspiration.

Dealing with uncertainty

As humans, our natural tendency is to fight uncertainty. Daniel suggests that the right strategy is to embrace uncertainty rather than to fight it. Negative uncertainties can harm us and we want to be well-prepared for those. However, there are also good uncertainties. We need to put ourselves out there to be ready for the good opportunities that life can throw at us.

Daniel finds that having a specific goal can be blinding. It stops us from seeing opportunities that appear right in front of us. When we focus on one thing, our brain is no longer able to see any other opportunities, even if they are there. It's similar to the metaphor of tunnel vision, which is the reluctance to consider any alternatives to one's preferred point of view.

Daniel says that to benefit from luck, you have to recognize it. To recognize luck, you need availability, free time, and an attitude that sees unpredictability as a good thing.

Stressors are signals

At the beginning of Daniel's unpredictable journey, the unpredictability of his income made him uncomfortable. Not knowing what he would make as income in three months or in six months was not pleasant at first. Now, Daniel is learning how to take advantage of the stressors and the ups and downs.

Daniel treats the stressors as signals. When stressors dropped, Daniel took it easy and rode the momentum, enjoying a vacation. When the low income months come, Daniel likes to think that constraints breed creativity. Daniel finds that when the stressor of a dip in income happens, something activates in your brain. You get more energy. You get more productive, and you start thinking of new ideas.

The stressor of a dip in income got Daniel thinking of new projects. He started wood-working and created a portfolio of cutting boards. So far, he's made $3600 from this project. It's been a small win so far. It may not be a major income stream unless he finds new marketing channels to explore. However, Daniel is happy with it even if it remains a small win.

A few weeks after the wood-working project, Daniel got the idea to create a cohort-based course. The fact that he had the stressor of a dip in income helped him find the right 20% to the 80/20 rule. This comes from the Pareto Principle which states that 20 percent of your activities will account for 80 percent of your results.

Daniel had no material prepared for the cohort-based course that he wanted to create. He had a few things in mind, some tweets, and some material scattered on the Internet. He spent a few weeks thinking about it before it began to materialize. Daniel articulated the ideas that he had for his course on forums and in conversations in order to test them out. He also stress-tested his ideas on Twitter and on podcasts.

Keep in mind that there needs to be a certain level of rigor under the surface to create a course. It's very hard to just jump into building a course without any knowledge on a topic or any material prepared whatsoever.

The successful info products

Daniel perceives procrastination as a signal that he's not ready yet. If he has no free energy available to create a brain dump, where the idea can almost create itself, then he considers that he needs to wait a bit more before starting. Procrastination is a signal that there are some gaps in his knowledge that are too hard for him to articulate at the moment.

Looking back two years ago, Daniel had a very small audience of under 10,000 Twitter followers. At that time, he started writing and releasing books. Since then, he had three successful info products.

Here's how Daniel's three successful info products came to be.

  1. The Good Parts of AWS: This was a technical book about programming and AWS. It was a brain dump of fifteen years of Daniel's experience with the technology. The brain dump didn't take very long. It required some editing to condense the information and it was done.

  2. How To Build A Twitter Audience: For this info product, Daniel prepared a one hour recording and some slides to walk people through real-life examples. He tweeted about it and answered people's questions for free on Twitter.

  3. The cohort-based course: This was the most elaborate thing that Daniel has prepared so far. It contains around nine hours worth of content. He had to work harder to figure out how to present the ideas in his mind. He learned that what works as a tweet does not work as a live presentation.

One of the best ways to start writing is to do a brain dump of what you already know. When it comes to marketing your work, don't try to put yourself at the right place at the right time. Put yourself in all the right places all the time.

Doing what Daniel did

Justin asked Daniel a very good question. He asked, "How does one go about doing what Daniel did without some significant amount of cash in the bank?".

When Daniel left Amazon, he had saved up for five years of expenses. He had no need to change his lifestyle when he left. You can't jump into this unpredictable world if you are living paycheck to paycheck. You need a cash cushion of at least six months to a year. However, worry about the right cushion should not stop people from taking the plunge because the stressor to have to make it work can help you.

Knowing where to start was a challenge. Daniel took a look at himself and realized that he had all this knowledge and experience in a particular domain. The biggest mistake that he made was that he thought he would increase his odds for success by focusing on something that he knew a lot about.

Daniel had been programming since he was five years old, the age that he created his first "Hello, world" application. Therefore, he thought he needed to build a software business around databases and programming. He thought this was his ideal business. The problem was that he was too idealistic. He underestimated the role of chance and unpredictability. Daniel's subconscious nagged him to open his eyes. He would ask himself questions like, "Are you sure you want to put all your eggs in one basket?", and "Are you sure this will work out?".

The variable income stressor

The lower your safety net is, the greater your sense of urgency will be. In this case, go for the low-hanging fruit. You don't need to create the perfect business. Go with what you have and try to gain the freedom and flexibility that you'd like. That may mean compromising on certain things.

Your first step can be to change from full-time employment to freelance work. You can maybe even arrange this with your current employer. Your income might drop, but you will have more freedom. You can then look for a few clients to do work for on the side, without having to ask your employer for permission. It will cost you something but you will gain what is necessary to arrange your life in a way that better matches your preferences and goals.

Adjusting to the unpredictable world

Daniel had two panic attacks, or crisis moments, since embarking on this journey. The first one was during his first week. He was unknown to the world. The only reputation he had was with his previous employers. He thought, "who will listen if I put something out in the world? Why will people trust me?". The biggest piece he was missing was the fact that he was unknown and had no marketing experience.

Daniel started with a portfolio of small bets, but didn't even realize it at the time. He tried a few different things, such as blogging, posting on Reddit, Hacker News, Twitter, LinkedIn, and Quora.

He monitored each channel to see if there was something there. Some channels took too much energy without any returns. Twitter stuck because Daniel liked it and got feedback that it was working. He continued trying his other channels for months but then stopped due to the lack of feedback and results. He's also been experimenting with Instagram but with less intensity.

Stack your assets

Daniel recommends having assets that you can stack. Writing, programming, and marketing are all assets or skills that can be stacked and combined. Realize your missing piece and find ways to acquire it. For many, that missing piece is marketing.

In order to gain visibility, explore personal networks, improve your rankings in Search Engines, and even paid marketing via Facebook Ads and Google Ads.

The creator economy

There are two types of careers out there. The first type of career is based on predictable success. Plumbers, architects, doctors, are all examples of this first type. The second type of career is based on chance success. Musicians, authors, startup founders, and YouTubers all fall under this second type.

This second type of career based on chance success is extremely competitive and very unpredictable. That's why there is the popular notion of the starving artist. There seems to be no room in the economy for every artist to succeed. We see the same on the Internet. There are runaway successes for some, and then a long line of unsuccessful individuals.

The counterargument is that the Internet is huge. There is plenty of room for people to make a living on the Internet, or at least a significant side income. Perhaps exploring different niches can help.

Jason asked Daniel a great question at this point. He asked, "This podcast may lead you to believe that you should quit your job and take risks. It may make you think that if you make enough small bets, one of them will hit. Is the creator economy capable of supporting many independent creators?"

To answer this question, Daniel makes reference to the economist Art De Vaney who examined the Hollywood industry and determined that it is impossible to predict which Hollywood movies will succeed. There are so many variables at play. The creator economy is much like that. It's impossible to determine who will make a living in such an economy and who won't.

Adding some predictability

Daniel advises to not focus only on the unpredictable world. Include predictable activities in the unpredictable to gain peace of mind.

During his second anxiety crisis, Daniel found some freelance work. It was a small gig of about ten hours a month. It didn't even cover his mortgage, but it was a good motivator for him. It gave him the confidence to write his book. He figured that if the book didn't work out, he would do more freelance hours.

Daniel left that freelancing gig and now has a Gumroad job as the predictable part of his portfolio at ten hours a week.

Daniel's current cohort-based class is an unpredictable project where he gets paid by the hour. It's different from the info products that he is used to, which make money when he is away from the screen.

Looking back at his own products, his Twitter course was very successful. It made over a quarter of a million dollars in just over a year. What caused it? Retweets and endorsements from influential people that Daniel didn't even know. It was a coincidence. When Daniel tweeted about it, they bought it and recommended it. This snowballed into other people buying it and recommending it.

If Daniel were to go back in time and re-do the launch of his Twitter course, the outcome would be different. It could end up making more or less than the income it made. We cannot rely on the predictability of outcomes with projects like these.

How to get started

Go for the low-hanging fruit. Try to do something small. Don't optimize it too much. Once you have something working, even if you don't know what made it work, you can replicate it and do something similar.

The world is complex. We don't always know what causes something to work. Was it the price, the landing page, or the cover? There are many variables at play.

Aim for small wins

We over-glorify failures. "I failed but I learned a lot" is a popular phrase nowadays. Sure, we learn from failures. However, there is so much more that we learn from a small win. There is a different kind of knowledge that we get from small wins that failure cannot give us. Small wins give us a knowledge of what works in the unpredictable world. Once you see something working, you can do similar things to build on your successes.

In this unpredictable world, success tends to bring with it other successes. Once you get a small win, other things you do tend to succeed even more.

Have a portfolio of small bets

Build a portfolio of small bets. Mix predictable projects to gain a greater peace of mind. For unpredictable bets, ignore the big upside projects. Go for small, limited upside projects that have a greater chance of working. Target niches. Lower your prices to create small wins.

Do not optimize too early. It's one mistake that Daniel sees a lot of people making. We all want to get the most out of what we work on. However, over-optimizing can lead to failure. If you charge too much for something and your reputation does not justify that price point, it can end up costing you. Always remember that reputation justifies price-point. Do not overprice your products.

When it comes to price optimization, Daniel suggests following Adam Wathan's advice:

"Giving your work away for free is like compressing a spring that releases when you put something up for sale" - Adam wathan

Adam and his partner gave things away for free on the Internet for years. Then, when they put a product for sale, they made a million dollars in a month. Ignore the profit because even they may not be able to replicate that if they were to re-do the launch today. They didn't know what kind of success it would become at the time of their launch in 2018.

Focus on writing, programming, and getting attention online. Build your own online reputation. Give things away for free to the community. It will pay off like it did for Adam.

Lifestyle design

Daniel is a proponent for lifestyle design. He optimizes on what he wants his life to look like rather than optimizing on income. Though he may not know what he will be working on this time next year, he knows what he won't do.

Daniel won't do things like a full-time 9-to-5 job. He doesn't want the office cubicle life. He doesn't want to work on someone else's terms. He doesn't want to commute to work. He wants to spend more time with his kids. He doesn't want to be an absent father. He doesn't want to work on purposeless things.

Figuring out what you don't want to do is important. We tend to improve our lives more reliably by eliminating things that we know we dislike, rather than trying to go after things that we think we will like.