Straight Outta Compton: Business Lessons From N.W.A

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carolynn

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N.W.A was started with money that Eazy-E earned from selling drugs on the streets of Compton. Before they got their first record deal they were selling CDs out of the trunks of their cars. They applied that same entrepreneurial sprit, learned on the streets, to the music business: becoming the most financial successful group in hip-hop history.

How did they do it and what can aspiring entrepreneurs learn from them?

-You’ve Got To Own Your Own Company: One of the first scenes in Straight Out Of Compton features Dr. Dre's mother yelling at him for not having a "real job."

She said, "I don't care if you’re a janitor, as long as you own your own company."

Dr. Dre’s mom made a good point. According to Business Week, the average small-business-owning family made $185,350 in 2007, much more than the $64,207 earned by non-business-owning households.

Dr Dre made $620 million, the largest single payday by a musician ever, in the sale of his Beats headphones line to Apple earlier this year.

You don’t make that kind of money working for someone else.

Ice Cube’s most profitable venture has been his production company, Cube Vision, which produced Straight Outta Compton, all three Friday movies, and the Are We There Yet franchise.

-You Need To Take Risks: Ice Cube left the biggest hip-hop group of all time because he wasn't happy with the contract he was offered. Who knew if he was going to be successful as a solo artist? He also started writing and producing family movies, even though he had a “gangster” image. Would people believe that Ice Cube was a family man?

Dr. Dre walked away from Death Row Records, a company that he founded and that owned the rights to some of the biggest albums of the 90's, to found Aftermath Records. Who knew if he could duplicate his success? He later co-founded a headphones company, despite having no experience in consumer goods. Could he succeed in an overly saturated market?

Both Dr. Dre and Ice Cube took huge risks that ended up paying off. According to CelebrityNetWorth.com, they have a combined net worth of over $1b.

-You Have To Treat Your Employees Well: Easy E and Jerry Heller received the majority of the profits from N.W.A and the group eventually disbanded because the other members felt taken advantage of.

Can you imagine what NWA could have become and the money they could have made if they’d stayed together?

Phil Jackson said it best, “If you want to be a leader, you need people to follow you.”

You need to keep your employees happy, especially the talented ones, in order to keep them.

NWA produced 3 very successful entrepreneurs: According to CelebrityNetWorth.com Dr. Dre has a net worth $800 million, Ice Cube is worth $140 million and Eazy E had a net worth of $8m at the time of his death.

What about DJ Yella and MC Ren? Although reasonably successful artist, they didn’t have the entrepreneurial chops that Dre, Cube and Eazy had.

So what's the lesson here?

If you have the business acumen, then it pays to become an entrepreneur. Above-average entrepreneurs tend to earn more money than they would have made working for others.

According to Business Insider, the rest of the small business owners (about half) will be worse off financially than if they worked for someone else: but the successful entrepreneurs, like Dre and Cube, will be much better off.

The point is there is a DJ Yella and DJ Ren for every Dr. Dre and you’ve got to figure out which one you are before you start your next venture.

Here's a link to the article
 
@carolynn Great find. In line with this is the book co-authored by 50 Cent and Robert Greene called "The 50th Law". Incredible read, I try to revisit it at least once a year.
 
@bryanj I also suggest the rest of Robert Greene's books. All a different take on how to maneuver intelligently through life. I personally like 'The 48 Laws of Power' and 'Mastery'.
 
@tomhanch Also great ones! If you haven't read any of Ryan Holiday's books (rock star young mentee of Greene) you should. Just finished his book on the dark arts of exploiting the media and it was pretty insightful.
 
@bryanj Thanks. I read 50 cents book a couple year's ago. Pretty good read. I was shocked to hear he had to file for bankruptcy recently. He always seemed like he had a pretty good handle on his business.
 
@carolynn If you have the business acumen, then it pays to become an entrepreneur. Above-average entrepreneurs tend to earn more money than they would have made working for others.

This is absolutely true.

The problem is that most people don't have an entrepreneurial bone in their body. It's just the way it is. You can read a ton of books and how-tos, but most people are never going to be entrepreneurs. And if they try, they will be miserable.

In fact, I might be willing to argue that the more business and entrepreneur materials/media you consume, the less likely the chance that you are actually an entrepreneur.

There's also survivorship bias in these sorts of stats. The reason why small business families earned $185,350 is because the ones that made shit went out of business, sometimes bankrupt and completely ruined, and got regular jobs. For a lot of entrepreneurs, the path to success is littered with failures. It doesn't just happen like that, the way that it happens for super stars. Most don't succeed on their first try or, worse yet, they succeed just enough to keep going. And 30 years later, they find themselves still running a tiny store that still barely makes them any money.
 
@carolynn Major lesson of NWA: Be the forefront of something no ones ever done before.

Major lesson of Beats Headphones: Change the paradigm. Beats was successful because they made the headphones into a fashion icon rather than a functional one. Everyone agrees they are shit headphones. No one cares. People still idiotically wear them as they walk down the street.

Major lesson of Ice Cube: If youre the IP creator (ie, the writer), you can do whatever the fuck you want.

Major lesson this sub should take from this?: be wary of survivorship bias and tread lightly. Big dick risks look like fun when you look at the 1-2 people EVER who have done something like this, and you never see the rappers who have tried to do the exact same thing and failed miserably. It's not enough to just say "well, Ice cube had business chops...duh". Sometime shit just doesn't go your way, and you lose big time. See: All the smart people who lost it big in 2008.
 
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