How I Lost My Life Savings And What It Taught Me About Blogging

This is a guest post from Roman, from How This Website Makes Money.

Ten years ago was the height of the stock market boom. Stocks prices went only up. All you had to do was throw money towards Wall Street and a few months later you’re a millionaire. People were getting rich overnight. 14 year old kids turned their allowance money into piles of thousand dollar bills. Easy money.

So I opened an account at an online discount stock broker – 10 minutes. Did research and found a company with financial charts that had all the lines pointing upwards – 20 minutes. After a few clicks of the mouse my life savings arrived somewhere at the New York Stock Exchange. In 30 minutes, I handed over money that took 13 years to accumulate.

I went to bed expecting to wake up with a phone call from my bank congratulating me on becoming their best client. Instead I woke up having less money than the day I popped out and got a smack from the doctor. At least on that day I had a new towel.

Ten years ago I lost a lot of money. A lot of money. For a whole year after my financial crises I was forced to live like Mahatma Gandhi. Biting into my stale bread and adjusting my garb, I made a vow that I would never let that happen again.

What Went Wrong? Why Did I Lose All My Money?

What I failed to realize that fateful day was that the stock market is a zero-sum game, which means that there is a limited pool of money. Money does not get created in the stock market. It just moves around. More specifically, it moves from stupid (politically correct: unlucky) people to smart people.

I had no idea what I was doing, so my stupid money went to someone smarter then me. When I was buying, a smarter person was selling to me, and then when I was selling, someone smarter was buying from me.

When you are playing a zero-sum game, you need to be the smart person so that you can take the money from the stupid people.

The Blogosphere is a Zero-Sum Game

The blogosphere is also a zero-sum game. But instead of there being a fixed amount of money, there is a fixed amount of visitors moving from one website to another. Each day they will spend their limited time on one website instead of another.

The idea is to get the visitors to spend their limited time on your site instead of someone else’s. Every minute they spend on someone else’s website is a minute that they will not spend on yours.

The question is: Do you have what it takes to convince visitors to spend their time on your site instead of someone else’s?

A Zero-Sum Game With Cats And Why You Will Lose

To demonstrate a zero-sum game, and why you will lose if you play, lets imagine a competition involving cats and people.

There is a auditorium full of wandering cats and randomly scattered booths in which human players stand. The goal of the game is to try to persuade the cats to come to your booth. After one hour, the player with the most cats in their booth wins.

You want to win the game, so what do you do before the competition? You research everything you can about cats. You read books, you go on the internet, you borrow your neighbor’s cat and practice cat calls. For weeks you rub your fingers together and make psst, psst, psst noises.

The day of the competition arrives and you get into your booth. The bells rings and you begin doing your whistling, finger rubbing and toy mouse dangling.

A few cats wander to your booth, but unfortunately you do not win.

The problem is that you did nothing special. All the information that you gathered about cat calling is publicly available information. The books you read, the websites you visited, and access to a real cat are all things that your competition has access to also.

Your knowledge does not differentiate you from everybody else. If everybody has the same information about cat calling then there can be no clear winner. To the cats, the players are all doing the same thing. There is no reason for the cats to move towards you instead of somebody else. At the end of the hour everybody will have roughly the same amount of cats in their booths.

The only way to win a zero-sum game is to be different. To possess information that nobody else has.

For example, by doing your own tests with cats and discovering something that is not written about and publicly known, you will win the game. Everybody will be doing the same thing, but you will be different. The other players will have an equal distribution of cats. You will have more.

Zero-Sum Games And How It Applies To Bloggers

To make money in the stock market you need to have an advantage over the other players. You need to know something that everybody else does not know, or you need to have a tool that nobody else has. That is the only way to move the money from somebody else to you.

Same thing with the blogosphere. It is not enough to just participate. It is not enough to just have a blog. It is a battle and the winner gets the visitors’ time. The loser gets nothing. You need to be smarter than the next guy. You need an advantage over all the other blogs out there so that you can convince the visitor to spend their time on your blog. Without an advantage you will lose all your visitors to the smarter guy.

The mistake I made when I first started my blog was the same mistake I made with the stock market. I thought all I needed to do was to buy stocks and I would make money. With blogging I saw that people where making lots of money and I thought all I had to do was make a blog and I would make lots of money.

In both cases I was wrong. What I failed to realize was that for everybody that makes money, there is somebody that loses money. For every blog that gains a thousand new visitors, these are thousands of visitors that will be lost by some other blogs.

I quit the stock market because I realized that I had no advantage over the other players. I had access to the same information that everybody else had. I simply knew what everybody else knew. In a zero-sum game you cannot win being like everybody else.

For a blogger, playing a zero-sum game, the situation is exactly the same. Without an advantage over other bloggers there is no way you are going to succeed.

The most important question a blogger can ask themselves is: what is my advantage? How I am different than everybody else? How do I become the blogger who takes the visitors from everybody else who are all doing the same thing? How do I become the guy who is selling his stocks at the height of the internet bubble when everybody else was buying?

If all you do is read the literature everybody reads and use the tools everybody uses then you cannot make money in the stock market, win the cat game, or have a successful blog.

This is a guest post from Roman. He is a new webmaster with a blog and website describing in detail what is involved in creating, maintaining and profiting from a site. Charts and statistics are used to reveal How This Website Makes Money.