The Law Of Effection; What is it and how you can apply it

I can bet Ksh 1,000 that you have never heard of the law of effection in your entire life. I first read about the law of effection in a book called The Millionaire Fastlane by MJ Demarco. The law was very simple yet made a lot of sense and impact. So what is the law of effection and how can it help you in your life? The law of effection states that the more lives you affect in an entity you control, in scale and/or magnitude, the richer you will become. 

There are 3 aspects in the law of effection for it to be effective. They are namely:

1.      Control

2.      Scale

3.      Magnitude

Control

Do you own your business or does someone else drives it and you are just a passenger? Owners of businesses decide how much each employee gets. If the owner changes his terms or closes the business and you are an employee, your source of income vanishes also. Owners can sell the business for a huge margin and retire early or hire someone else to run it and passively eat the profits.

Scale

How many units of a product do you sell in any given occasion? 100? 10,000? 1 million?

It is often said that if you want to make a million shillings, serve a million people. The more people you help, the greater the impact you will have. This is one of the principles that most businesses like supermarkets use. A supermarket like Tuskys serve millions of people everyday by providing items that people want. If you want your business to succeed, you have to serve many people not just your local neighborhood.

Some businesses cannot sell more 100 items in a given day for example a mutura stand. The person selling the mutura cannot serve a million people in day but a person selling items online can. The one selling online can reach millions of people with ease unlike the mutura fellow. So how scalable is your business?

Magnitude

How much are you charging your products? 10? 100? 1000? Depending on how much you charge your product, you can make millions just selling a few products. This is what luxury brands do like Rolls Royce. They make very few high quality cars but sell them at a very expensive price. So by the time they are selling their second car, they have already made their money and some profit back. Apple also does the same. They sell their phones at a very expensive price and make huge margins.

Combining the elements

 For the law of effection to work effectively, combining two or all elements will help. A company like Apple for example, combines scale and magnitude making huge margins by selling $1,000 dollar phone to millions of customers.  Magnitude and scale. If you own an online business and you sell phones for example, you have control and scale. Control in the sense you own the business and scale in the sense you have a large pool of customers potentially billions if you play your cards right. If you price your phone right and you are selling to a lot of people, you will have effectively combined all 3 elements whereby you own the business and sell to a lot of people at a great price.

Thank you for making it all the way to the end. I hope you find the article insightful. If you have any suggestions on topics I should write about, please write in the comments below.