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It is definitely an advantage to understand the different types of industries before starting any type of business. Some businesses that may be easy to get started at the outset can become a ball and chain later on. Making good decisions are based on having good knowledge, so the following should be very easy.
THE THREE BASIC CLASSES OF INDUSTRY
FIRST CLASS of INDUSTRY: The 1st Class is Natural resources, recourses, currencies, and banking. It's easy to see how wealthy some families became that got into oil, mining, banking, etc.
SECOND CLASS of INDUSTRY: The 2nd Class is the manufacturing of products for other companies or consumers. In the past, it took a lot of capital to start manufacturing, and it still does. However, many highly successful businesses start selling products, with the manufacturing and shipping being outsourced. Many companies in China and Korea specialize in making products for the US and other countries very economically. Starting manufacturing by outsourcing can help new startups get off the ground with a lot less upfront capital.
THIRD CLASS of INDUSTRY: The 3rd Class is service-related industries. Our education system prepares most people to enter the workforce by getting a job that pays an hourly rate. For a higher-paying job, students often go to college. You will find the majority of people in any society work in service-related businesses. If you choose to work in a service-related industry, your decisions about building your own business are usually based on the same concept. People tend to start their own business in something they are familiar with. If they had a service-related job, they would most likely start the same type of business in the industry they had been working in. For example, If they worked in a construction company, they would most likely start their own construction company.
Some very successful businesses are service-related, such as franchise food chains and hotel chains. These businesses simplified their processes so that they could be replicated. When the service requires a maestro for the delivery of the service, it will be very hard to scale, and the owners often have a hard time training people to their level of expertise. You can still scale but with other services that don't require maestros to deliver.
THIRD CLASS and SECOND CLASS
Businesses that sell tangible items, including software, are much easier to scale than service-related businesses, but you can do both. You may start a service-related business, and as you progress, you may start seeing products that align with your service and begin selling those products on a broad scale. I built a very successful fencing business in my 20s, an opportunity came along for me to open my own lumber yard. We began selling fencing materials to other fencing contractors. The business took off, and we were always selling out the lumber as fast as it came in. If I had stayed in that business, I would have started to invest in forests, and then I would have moved into the First Class—Resources.
In the last couple of years, many people that couldn't work because of covid started selling products online, and when they could return to work, they were making more money than their jobs were paying and so never went back to their old jobs.
I think it is very helpful to understand this data about the three classes of industry. This data is not something you will find in the average books out there on business, but trust me, the world's wealthiest families do know this.
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