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The FlyWheel: What Amazon and Jay-Z Have in Common

When did you become a Prime member? Do you think Jay-Z became the owner of Tidal in a few days? Daily, we hear of startups raising new rounds of money or inventing new technologies. We hear of people who’ve gone from a little to a lot. What we don’t hear about is the process. We know that hard work played a part, as did luck, and maybe even some connections. Yet, we tend to omit that getting there required endurance and inevitably, a few momentous breakthroughs.

In the words of Jim Collins, the author of the classics, Good to Great and Built to Last, many successes require people or companies to continuously push a giant flywheel until a single breakthrough or realization occurs. At that single point, from the outside, it seems like a miracle or an act of luck, but from the inside, the story is very different. It took theorizing, experimentation, failure, perseverance, and energy to get to the point where the process yielded any results and became self-sustaining.

The Locomotive, The First Flywheel?

Technically speaking, a flywheel is a large rotor spinning on an axis. As the rotor starts spinning, it begins to store kinetic energy. Adding energy after every rotation, it accelerates quicker and quicker, picks up momentum and begins to sustain a high rotational speed. Ultimately, the rotor is moving so fast it moves forward without almost no effort. An easy to remember application is a locomotive.

Man pushing an old school flywheel

Before diving into any real-world applications, it’s helpful to know the components that make up a flywheel. In essence, the concept is made up of four parts:

• Has one or more feedback loops — for the wheel to create energy and sustain momentum, it must be built on previous loops that guide and inform the direction. These are not your common feedback loops, but rather feeding loops.
• Continuous momentum — Dissecting the first concept further, a flywheel can only continue to move forward if it’s built on some energy that can sustain itself. Here the energy is generated by loops that keep feeding into the system itself.
• Productive, forward direction — Every flywheel, with time, should move forward towards an intended outcome.
• An outcome — Being that it’s moving in a single direction, a flywheel should have an outcome it’s aiming for, or feedback loops, momentum, and direction would be ill-informed.

A Very Short Story of Amazon

Now that we know what a flywheel is, let’s get to some examples. In a business context, the most common and popular flywheel example is Amazon:

A diagram that has been shared many times, but took 5 years to get to

The diagram is fairly straightforward to decipher, but this is how Amazon has dominated the online marketplace:

1. Amazon provides us all low prices on an expansive selection
2. The expansive selection leads to traffic, representing demand
3. The traffic attracts the supply-side of the equation, sellers
4. As more sellers enter and compete in the marketplace, Amazon can charge those businesses for fulfillment and storage costs, which offsets fixed costs
5. As Amazon decreases fixed costs, and more sellers compete, costs continue to decline for all buyers
6. Buyers keep returning, not only due to the selection but also the price
7. As the cycle continues Amazon begins to broaden its competitive moat, and no company can compete with Amazon as it has the most sellers, the lowest fixed costs, and most buyers

Mapping this to the concept of a flywheel, Amazon has the following to drive their success:

• Feedback loops — traffic that drives demand, supply that drives low costs for buyers; both of which feed into the system
• Momentum — traffic growth that increases demand, more sellers which decrease costs for buyers
• Direction — revenue growth that reduces fixed costs and increases top-line growth
• Expected outcome — one of the largest marketplaces to exist

Though the diagram is simplistic, Amazon’s story depicts what happens when a business finds what core components enable long-term, sustained growth. Not only is a flywheel relevant in business contexts, but it also has applications in personal life as well.

Sophistication Wins

Not many people would consider rappers a source of flywheel dynamics. However, once broken down, it’s easy to see how the lives of many resemble one.

Consider one of my favorite artists, Jay-Z. His first flywheel driver was found when he released, Reasonable Doubt. The album was seen as hardcore due to some of the language, yet Jay-Z included lyricism and class that brought some of the more sophisticated concepts of a rapper’s lifestyle to affront. Better said by Shawnee Smith of Billboard, it was Jay-Z who also began to transform the hip-hop scene from its hardcore “gangsta rap” to something that bears a more refined style — that of “Armani suits, alligator boots, Rolex watches, expensive cars, broads, and Cristal.”

In addition to bringing a more sophisticated style to hip hop, Jay-Z was also one of the first to introduce the idea of a self-managed label and business. The business, Roc-A-Fella records, which was host to Kanye West, Cam’Ron, and other well-known artists allowed Jay-Z to retain a larger percentage of his album sales, while also preserving his creative insights.

With a sophisticated style and a self-owned recording business, Jay-Z was able to ignite his flywheel by owning the creative process and financial return. He then generated momentum by reinvesting his album sales into other businesses, and ultimately became one of the most successful recording artists in history.

Mapping this to the concept of a flywheel, Jay-Z had the following to drive his success:

• Feedback loops — revenue from recording sales, emulation of style throughout the industry; again both feeding into the wheel
• Momentum — multiple sources of revenue from each record and venture
• Direction — movement towards becoming a hip hop mogul
• Expected outcome — be the hip hop mogul

Jay-Z might be an imperfect example of a flywheel success as a person, yet the drivers of a differentiating style and successful business ventures have allowed him to reinvest his time and money to become one of the most financially successful artists of all time.

How to Become The Next Jay-Z

Finding a flywheel takes patience and creativity. It took Amazon 5 years to develop the one noted above. It took Jay-Z a lifetime of listening to hip hop and taking a chance on becoming a full-blown businessman. But, determining what works for you can be a shortcut if you ask yourself a few preliminary questions.

1. What are you trying to achieve?
2. What are the feedback loops that help you to get where you want?
3. Can these loops drive output that you can reuse as fuel for momentum or additional feedback loops?
4. What is momentum characterized as?
5. What are drivers of momentum?
6. Are there more than one drivers of momentum?
7. What can you do to pull that single driver harder, faster, stronger?

Conclusion

You may be thinking flywheels are simply another word for feedback loops, and to be honest, they kind of are, but they also have a few key differences. First, they take into account momentum and lead to breakthroughs. Feedback loops help you ensure you’re going in the right direction, while flywheels ensure your loops feed energy in the right direction and build momentum to help you reach optimal outcomes as quickly as possible.

When developing your flywheel, identify your direction, implement some feeding loops, find the loops that increase momentum, and keep persevering until you hit that breakthrough. The drivers may need to be tweaked as momentum fluctuates, but similar to Amazon and Jay-Z, being patient and creative will help you reach your goal.