Thread by @tayooye

THREAD: Financial Independence : Retire Early (FI:RE Series) Part 1c: Case study: Dangote Group.

New readers, please start here:

My FI:RE Story: bit.ly/2SbVPB5
Part 1a: bit.ly/2EHrDKU
Pat 1b: bit.ly/2URtlOK

Remember,
Money is:
1. A means of exchange for PERCEIVED value.
2. A store of ACTUAL value.
The way to make more money is to increase the PERCEIVED value of yourself, your products, and your services.

The 3 key drivers of PERCEIVED value are COMPLEXITY, BRAND IMAGE, and STRUCTURAL ADVANTAGES. Let’s break the down for the Dangote Group.

Brief History: At 21, Aliko Dangote borrowed $3,000 from his uncle to start an agric commodities business in Nigeria. He succeeded in building a ubiquitous commodities business in the country and managed to repay the entire loan within three months of starting operations.

Today, Aliko Dangote is the richest man in Africa and Dangote Group is a diversified conglomerate, with interests in cement, commodities, real estate, oil and natural gas, telecommunications, fertilizer and steel.

But it all started with commodities. Why commodities? And how did he apply COMPLEXITY, BRAND IMAGE, and STRUCTURAL ADVANTAGES to build a commodity business in Nigeria. Let's start by analyzing Nigeria in the 1980s when he started the Dangote Group.

Nigeria is a not really a country. It is an amalgam of 250 ethnic groups that were literally forced together by the British. The road network in the 1980s was horrible; the ports were a mess; sales logistics did not exist; and the people could not afford to pay a brand premium.

COMPLEXITY: AVOIDANCE. The most complex problem in 1980s Nigerian was logistics. Nobody wanted to deal with the bad roads, poor customers, and informal sales network. Dangote tackled this complex problem, and became a monopoly serving 150 million people sugar, salt, and rice.

The question all FI:RE chasers need to ask is: WHAT ARE THE PROBLEMS EVERYONE IS AVOIDING? It will almost certainly be the most complex problems in your space. That’s the problem you should solve: that’s where margins reside.

STRUCTURAL ADVANTAGES: Dangote used his government relationships to create a monopoly. He harnessed his primary location advantage (180million people) to scale his commodities business, and developed emerging market skills that he now uses to operate across 10 African countries.

Today's winning structural advantage is technical skills. People with in-demand skills can literally write their own cheques. Software dev, AI, data analytics, and biotech will shape the 21st century. FI:RE chasers can't be oblivious of these fields.

BRAND IMAGE: Branding is Dangote Group’s kryptonite. The group has failed at selling myriad differentiated products including noodles, tomato paste, pasta etc. Brands operate in the emotional space (we are cool) while commodities win with rationality -we are cheaper/available.

FI:RE chasers should learn about the 3 drivers of margins but the key lesson from this case study is that people ONLY need to excel at 2 drivers to succeed. I focus on complexity and branding. What about you?

Thanks for reading my threads. The fact that you're reading has forced me to codify some of the stuff that's been swirling round my mind for the past few years into these tweets. I hope it's been useful. Merry Christmas and Happy New Year in advance.