… and came across an interesting story.
Don’t believe me that the world is changing? Check out these two stories, one from each end of the age spectrum. The first is about a young guy — looked to be in his early twenties — I met as I was coming out of a hotel in Vegas. We were each waiting for the valets to drive up with our cars, and this kid asked me if I had any advice for him. He recognized me from television, said he was a rapper, trying to catch a break, wanted to know if I could help him out.
I said, “That’s not really my area of expertise.”
Just as I was saying that, the valet drove up with this guy’s car — a sweet Aston Martin. So I turned to the guy and said, “Homey, it looks like you’re doing okay for yourself.”
It was interesting — the kid was out for advice, but from the looks of things he was doing better than me.
He said, “No, I’m making plenty of money. But it’s not what I want to be doing.”
So I asked him how he was making money, and it turned out he was a fairly well-known artist, a painter. He told me he’d hit upon a great way to monetize his work. Somehow, he’d built a platform of over 100,000 Instagram followers, and each week he’d put up an original painting and announce to his followers that the design would be available on a T-shirt for the next twenty-four hours. It was a “one day and one day only” type deal, and off of that he would collect all these preorders for the limited-edition shirt, which he’d price at $40, $50, $75, whatever the case might be. Next day, he’d take his design to the screen printer, run off the precise number of shirts in all the right sizes to fill his order, and ship everything out. Every week, he’d repeat the process with a new design.
Right away I thought, *What a great business model.* The guy was getting full margin on his orders, because he was selling directly to his customer. He didn’t have to deal with returns, or sizing issues, or warehouse issues. There was no overstock, no inventory. No special software, no significant start-up costs. And the best part — he’d set it up so his customers had to prepay, meaning he never had to raise any capital to fill his orders.
I said, “How much money you making on this deal?”
He said, “Last year, we did $1.3 million.”
One point three million dollars! On a business run entirely from this guy’s cell phone — I couldn’t have found a better power of broke story if I’d hired a Hollywood screenwriter to think something up. And underneath this great success was a reminder that the more things change, the more they stay the same. Why do I say that? Because this guy’s business model was basically exactly the same as the one direct-mail marketers have been counting on since the 1960s. And so was his conversion rate — one-half of one percent. He was averaging about 500 T-shirt sales each week off that 100,000-follower base. That’s the same return they used to get at Publishers Clearing House, at Columbia Record Club, at pretty much every other direct-mail company on the planet — the same return you can still expect. The only difference was that his method of reaching that customer had changed. So even though this kid had found a way to tap into today’s technology, he was basically borrowing a page from an old playbook. Same formula, different platform.
— pages 40-41
Boldfaced emphasis added by me.