1914 – Multidimensional Economics with Doug Howarth

Josh (00:00:05) - Hey there, a thoughtful listener. Are you looking for introductions to partners, investors, influencers, and clients? Well, I've had private conversations with over 2000 leaders asking them where their best business comes from. I've got a free video you can watch with no opt in required, where I'll share the exact steps necessary to be 100% inbound in your industry over the next 6 to 8 months, with no spam, no ads, and no sales. What I teach has worked for me for over 15 years, and has helped me create eight figures in revenue for my own companies. Just head to up my influence. Com and watch my free class on how to create endless high ticket sales appointments. Also, don't forget the thoughtful entrepreneur is always looking for great guests. Go to up my influence. Com and click on podcast. I'd love to have you. With us right now. Doug Howarth. Doug, you're an author. You're an inventor. You are the discoverer of hypernomics and the CEO of Hypernomics.

Josh (00:01:15) - Your website is hypernomics. Com and wouldn't you know it, the name of your book is hypernomics. Doug, it's great to have you. Right. We call that brand consistency.

Doug (00:01:26) - Yeah. So you got to have that right. So yeah we want to have people know where we are. Right.

Josh (00:01:31) - Well recently published on Wiley again doing very good sales right now. So congratulations on that Doug. Thank you so much for joining us. We would love to hear what Hyper Nomics is.

Doug (00:01:42) - Well, hypernomics is a way of studying the market that uses more than three dimensions. And it turns out that it it has some very ancient roots. And I discovered this actually, after I had written the book, had done a run a few months ago, and I got down to the end of the trail and decided to study. It was looking down. I saw a tiny little red reddish black ant, and I decided to study this ant because, Doctor Richard Feynman, the Nobel Prize winning physicist, had studied ants.

Doug (00:02:09) - And I saw this ant started to make this clockwise turn. And he's doing this in little fits and starts. And after he goes about 30 40s, he makes a almost a complete circle. Except he's out a little bit further than when he started, and he goes around again and little fits and starts and he's out a little bit further than he started again. And he does it again. I realize every time he stops, he's on a little piece of the asphalt that's just a little bit higher than the piece right before. And I realize what this little guy is doing. He's he's doing surveillance. So I went back to race back to my house, type in and surveillance, hit it into a Google search bar. And sure enough, ants do surveillance. And what they do is they're looking for places. This is going to sound like this is what Hypersonics is. They look for places where they. And this is like an ant doing hypersonics real estate analysis. He's looking for places that are new places to live, that are dry, have the right amount of head space for the ants, or clean close to food sources but away from other ants.

Doug (00:03:15) - it turns out that this is what people do. So these ants have been doing this. This species of ants has been around for 140 to 180 million years ago. So people I claim have been doing hypersonics since there have been people. And this is a way to figure out how the markets open up for everything from real estate to restaurants to cars to airplanes to software. Anything that we buy, we can actually use this technique to figure out what we're going to do. And so the easiest way to look at this in a human situation is that, when we had Covid out here, probably much like you had out there in Florida, here, out in California, when we had Covid hit, the restaurants were forced to go outside. Remember, it was early 2020. And, we went outside and the restaurant that we were going to had this big capacity inside, but not so much in outside. And so all of a sudden the lights started going out the door every Friday and Saturday nights. And, that was a problem for us.

Doug (00:04:12) - And so I, I looked at what they had in there, their arrangement of their tables. And I came up to the, the manager of the store and I said, hey, Kayla, do you want to make more money? She says, well, sure, Doug, what do I have to do? So what you have to do is you have to take out some of the tables of six and four and replace them all with tables for two. Now, I knew this just intuitively, but I looked it up. There's more than twice as many parties of two that go to restaurants than there are parties of four. And so what she did, she swapped out some of these tables, and the revenue shot up 25% in two months. So it's just trying to figure out how the patterns are for a given market, and then trying to work with that so that you can try to maximize profit, whatever you're doing. And it looks at how people value things and what the limits are that they can spend for whatever it is that they have to play to buy.

Josh (00:05:06) - You know, in the reviews for your book, a lot of people talk about hyper nomics as being this dichotomy to the traditional supply and demand model. Do you mind explaining that a little bit?

Doug (00:05:15) - Yeah. The traditional supply demand model says that there is one. They call it a downward sloping demand curve. And there's one supply curve. And they intersect at this point in the middle. And you know, this made a lot of sense in 1776 when Adam Smith wrote Wealth of Nations. And then a little over 100 years later, when John Marshall wrote the first detailed textbook on economics, it made a lot of sense, because you might only have one price for bread in a town. You might only have one price for a hammer or a shovel or lumber, things like that. But it turns out that, you know, the iron ore right now, we might only have one price for iron ore in the entire world. But iron goes into cars, and it turns out that there's hundreds of miles of cars.

Doug (00:06:00) - And so the price for the car is determined by things like how new it is. It's horsepower. In the case of electric car, it's ranged the number of seats. And so this hypersonics without having to bog anybody down into the details, that doesn't want to get into the details. Hypersonics basically sorts through all these details, Josh, and figures out what something is worth based on those features. And so the same kind of stuff that we do for cars or planes or any of our clients, you can also do for the stock market. So as of yesterday, we've been. Putting together a fund. Now, I have to emphasize this not open for public sale yet. So I have to say that so that the FCC doesn't come down on us, but we have our own little private fund, and it's been up for nearly 50 months, and it's doing 1.96 times, as well as the S&P 500 only using S&P 500 stocks. And what we're doing is we're finding the stocks that are undervalued according to what everybody buys the stocks for.

Doug (00:06:59) - We're also doing 1.25 times as well as this company called Berkshire Hathaway. But what Buffett owns now, of course he has more money and he has a harder time making the kind of trades that we do. But the technique works for everything from stocks to train travel to spaceships to software.

Josh (00:07:19) - Yeah. And Doug, I think that there are absolutely applications here for pricing. So just kind of bringing this down to a micro level, let's say that there is an owner of a consultancy, right, in pricing. You know, they're looking at what the competition is charging. They're looking at their own costs. And then they're making some assumptions about what they think the market will bear. you know, obviously, I think a lot of us as business owners, you know, we want to charge. I think that the thinking often is I want to charge the most that the market will allow while still being fair with my customers. Sure. Right. And there's some inherent I won't say flaws, but that's just the conventional way of thinking.

Josh (00:07:59) - How would you approach that formula?

Doug (00:08:01) - Well, getting back to the restaurant, you could out here in California, you can imagine that your consultancy is like selling. You're selling a consultancy, you're selling a quality, you're consultancy, which in your case, Josh, you've got a very well known name. As you start to get your name more widely recognized and people have come to you, the value of your product in the eyes of the people that would work with you goes up. And then as they start to get reviews that show that what you've done has helped them, that also forces your value up. And so what you could do is you could plot how much you've received per engagement times, the number of engagements you have. And what you'd find is there's going to be a there's going to be a limit, which we call a frontier demand frontier that forms for your company. And it's actually pretty easy to find. You can do this in the stock market. You can just pull in the stocks.

Doug (00:08:49) - And every day there's this, this outer bound that the stock market has accepting Amazon. Everybody outside of Amazon forms a the best performers in the market which you would be close to form this boundary that you that that actually explains what they can what you can make. And depending on the shape of that boundary, it may behoove you to charge more. If you already are pretty well booked, you may want to charge more than you've been charging. But if you're if you have some room, you'll find if you drop the price, depending on the shape of this, this frontier, that you can make more money. And that's kind of what we like to figure out is the shape of this, this frontier. Yeah. And what happens when you try to go up and down that, that limit. So famously in our company, what we did is there was a company that was trying to make a supersonic business jet back in 2020, and we worked out the cost. They told us everybody what their costs were and we the cost look reasonable, and they told us what they're going to sell it for.

Doug (00:09:44) - And based on the fact that it was going to go nearly a thousand miles an hour, their sales price looked pretty reasonable too. But then they said they were going to sell 300 of these guys in ten years. And our analysis said that this this limit, this frontier, said that they're going to make 47 when they launched. So I kept my eye on them. And then five years later, the frontier was moving in their directions. Remember, they wanted 300. The limit originally was 47. So in five years they started out with 20 orders, and five years later the only still had 20 orders. And so the frontier was holding. And so I wrote on LinkedIn, I said, it's worth every penny. But there's not enough pennies in the world for you to make this thing. And an angry reply from somebody I knew by the way I used to work with. And he said, well, we just got this big order in. And I said, well, good for you. You're still not going to make it.

Doug (00:10:32) - And six months later they went bankrupt. Oh, yeah, they stopped writing. Me too. So.

Speaker 3 (00:10:38) - Yikes. Yeah.

Doug (00:10:40) - But yeah, this is real world stuff that you can apply to all kinds of stuff. It also works for real estate. So in real estate, there was this house out in alpine, new Jersey that was called Stone mansion. And in 2010 it was up for sale for $69 million. While our analysis said it was worth about $25.3 million. And so this guy held it and held it and held it. He held it for 12 years before he sold it for about 25 million, which with inflation was very close to what we suggested in the first place, because he had overvalued the the features that he had relative to the market. Now, what he was hoping for is you get somebody that was, you know, really liked this place and was willing to pay this premium. But it was he was over two times what the house was worth and nobody wanted to pay that.

Doug (00:11:27) - So it's it works for things that are priced too high. It also works for things that are priced too low. You can price something too low and go bankrupt too. So there was a, the seventh employee at Microsoft, a guy named, Vern Rayburn, went out to Albuquerque and decided to make little business jets for cheap. And he started making these things for $770,000 a piece. They started taking orders. Well, he got 2600 orders, which is more than anybody else had for anything in that area. And why did he get so many orders? Well, the thing was worth, according to our calculations, was worth two and a half times what he was charging for it. And so he went bankrupt because he didn't charge enough. And so it turns out you can weigh these things out and you don't have to be, you know, a tech to do this. You just, you know, hire a tech or you get somebody to teach you how to use the tech. This. This helps you figure out what the things are worth based on what people have paid for other like, products.

Doug (00:12:22) - And that's that's kind of the whole thing. And so what you what you don't want to do here is you've seen a lot of people talking about relying on the gut and think, you know, thinking fast, moving slowly. The thing is, is that or thinking fast and slow like can and I was talking about, well, the thing about accurate pricing for any product is it's not based on what you think, it's based on what the market thinks. You're only one person in a market of potentially thousands or hundreds or thousands or depending on what you're selling, millions of people. And so what you want to do is you want to figure out how everybody else sees your product, not how you see the product. And so what we try to do is take our own opinion. We back our opinion out of the analysis and just show you what the analysis does. And so that's what the where the power of this comes in is. It shows you how the market thinks rather than how you might think for sure.

Josh (00:13:13) - Doug, any other implications? I mean, obviously we've been talking about pricing a lot. any other for, let's say for a B2B audience, it might be a consultant agency, you know, some service provider or some sort. And, are there any other lessons that they can take from hyper nomics that that may be helpful for their own impact and growth?

Doug (00:13:34) - Yeah. I mean, I think if most people here in the world of certainly if they don't use Microsoft products, they've seen other people use them. And and what you've seen Microsoft do over time is, well, Josh, you may remember you're a lot younger than me, but when Microsoft Office first came out, you were buying each component. Yeah, with several hundred dollars you buy Excel, it was $300. You buy a word, it was $300. You buy PowerPoint is $300. And what this was doing was that the people that really needed it, you know, I was working for Lockheed Martin. People that really needed it would buy it.

Doug (00:14:06) - So these, you know, the companies that could afford it bought it and they would use it. But then what happens is in order to get more sales, the price has to fall. And so what this does is it shows you it gives you implications about how the prices should fall and what the implications are for the revenue as you do that. So most we would call this again, most demand curves. Most of them are what we call pretty flat. Meaning if you keep dropping the price, there's actually more revenue at the lower end of the market than there is at the higher end of the market. So as you started to drop the price more and more, so now you can get a complete bundle from Microsoft for about $130 a year.

Speaker 3 (00:14:41) - Yep.

Doug (00:14:41) - Yeah. When they discover, well, they discovered if I give it to 5 billion people at this price, it's worth more than 100 million people at this price. And so that that's something that you have to kind of try to discover for yourself and to see how people are responding to what it is that you're offering.

Doug (00:14:56) - So you can give them the best offering. And that's what we're trying to do is to figure that out for them.

Josh (00:15:01) - So hyper nomics as as a company itself. Can you tell me share. Just obviously, you know, we've talked about the book. yeah. The book, by the way, is titled Hyper Nomics. It's available on Amazon, Barnes Noble and everywhere else. it is using hidden dimensions to solve unseen problems as a subtitle. And again, that's available at your website. It's hyper nomics. Com but tell me more about the work that you are you speaking? Are you consulting or how do you work?

Doug (00:15:28) - Well we do. I'm going to give a speech next month in Minneapolis on part of what it is that we do here. And, we do consult. We've consulted for NASA, Lockheed Martin, Virgin Galactic, United Technologies, and then we consulted for that restaurant down the street and a small startup trailer company, you know, teardrop tailor companies. So it works for everything. And we also, we we don't just consult.

Doug (00:15:53) - We're now starting to sell our software that we we kept internal to ourselves for a while, which we call hyper Anamika. And hyper is, it's pretty involved. So what we try to what we do is we teach how to use the software, along with teaching what hyper nomics is to our clients. And my publisher, Wiley, is is marketing the book as a textbook. We think it's going to be it'll start out as a unit in econ classes, and then we hope it's going to grow to a class and then a concentration and eventually a major at universities, because there's quite a few things you can do with it. It turns out that Covid actually behaves according to hyper nomics, and that that was interesting too. So we found lots of applications for it. And we're trying to, you know, keep beating up the, you know, these markets and figuring out what starts to percolate up when we we start to apply this to those fields. So it's it's pretty useful that way too.

Josh (00:16:51) - Yeah.

Josh (00:16:52) - you have some good videos on your website, by the way, if someone wants to do a deeper dive on this, where again, you can go to hyper Nomics. Com click on videos and you've got some of your presentations that you've done. And boy what a what a great topic for a Ted talk. I don't know if you've graced the Ted stage yet, but, that would likely be imminent. given your area of expertise.

Doug (00:17:13) - Yeah, I was, offered a Ted talk, and then Covid hit, so I have to go back and start to re initiate that. But, yeah, it's, we just have one of our engineers built a model that shows how aircraft engines and aircraft work together, and the model ends up being seven dimensions. Now, it's a seven dimensional model, but it's it's relative to itself. So you can actually build a seven dimensional model and a 3D printer, and you can you can hold it in one place. And so we're going to show we're going to want to talk about that.

Doug (00:17:43) - And in fact I'm going to talk about that in my next speech about how that works together. So it lets you see it basically gives you market anatomy too. So when we talk about the engines that go into a jet, it shows you how they relate to each other. And so for example, if an engine and a plane both are up against their their limits, again the frontier turns out if both dropped their prices both firms could make more money. And that's something you can't figure out unless you start to do a deep dive into this. The market, which is what hyper Nomics does. It gives you a really deep way to claw your way into what's what's going on the market. So you don't have to guess. We don't like guessing. In fact, we don't even like giving opinions. What we like to do is give, you know, give the results of equations and insights and consultancies to the to the clients so that they can make their own decisions. That's what we try to do with this.

Speaker 3 (00:18:34) - So yeah, who.

Josh (00:18:36) - Needs to grab your book hyper Nomics who should be reading this?

Doug (00:18:39) - Well, any anybody that has to do market analysis, be it for again we're doing it for finance. So anybody that's in the field of finance, anybody that's doing business development managers should find you should read this. And if they don't want to do the technical stuff, they should, you know, find somebody in their company that's going to do the technical stuff so they can make better decisions. More often. What we see is too often somebody gets wrapped up in a in a design, especially in outfits like aerospace when they were we're talking about that supersonic business jet. It was a bright, shiny object. The engineers like bright, shiny objects. And they won't do this. The necessary analysis to figure out the bright shiny object will sell. So anybody that wants to make sure that they've optimized their product needs to use this. And so we're also doing this for a little small trailer company that is building a teardrop trailer.

Doug (00:19:30) - So you have to use this to try to figure out what the optimal price and the features are of any product that you're building.

Speaker 3 (00:19:37) - So, yeah.

Doug (00:19:38) - Anybody that does that kind of work.

Josh (00:19:40) - Doug Howarth. Your website again is hyper nomics.com. The book is hyper nomics, which again is linked from your website, of course on Amazon and everywhere else, using hidden dimensions to solve unseen problems. Doug Howarth it's been a great conversation. Thank you so much for joining us.

Doug (00:20:01) - Gosh, thank you so much for having me. It's a great show and I really like to be a part of it. So thank you for having me.

Josh (00:20:12) - Thanks for listening to the Thoughtful Entrepreneur show. If you are a thoughtful business owner or professional who would like to be on this daily program, please visit up my influence. Com and click on podcast. We believe that every person has a message that can positively impact the world. We love our community who listens and shares our program every day. Together, we are empowering one another as thoughtful leaders.

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