I've gone back and forth on how much an idea is worth a few times. At first, I thought ideas were worth a lot. Then, I thought it was all execution, and ideas are worthless. I've been thinking about it some more in light of some recent deals, and I've come around a little to believing in the value of ideas again -- with a caveat.
But first, let's check out the best post written on the subject. Here's Derek Sivers --
To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.
AWFUL IDEA = -1
WEAK IDEA = 1
SO-SO IDEA = 5
GOOD IDEA = 10
GREAT IDEA = 15
BRILLIANT IDEA = 20
NO EXECUTION = $1
WEAK EXECUTION = $1000
SO-SO EXECUTION = $10,000
GOOD EXECUTION = $100,000
GREAT EXECUTION = $1,000,000
BRILLIANT EXECUTION = $10,000,000
To make a business, you need to multiply the two.
The most brilliant idea, with no execution, is worth $20.
The most brilliant idea takes great execution to be worth $20,000,000.
That's why I don't want to hear people's ideas.
I'm not interested until I see their execution.
That's the gist of the post, and it's one of the most important ones to read if you think a random idea is going to make you a lot.
Derek elaborated further on AppSumo's "Uncommon Sense"
Ideas versus execution. A friend of mine said, “Hey, I
met this really good entrepreneur. I really want you to
meet him. He’s got a really good idea. He’s got a really
brilliant business idea, and he wants to run it by
you. I told him I’d introduce you.” So I said, “All right,
all right.” He CC’d me on the email so now it was too
late for me to say no. So I met with this guy and said,
“Okay. What’s your idea?” And he said, “Well, I’ve got
this killer idea. This is like a billion dollar idea. This is
huge! But I need you to sign this non-disclosure agreement
first because really it’s a billion dollar idea. If you
hear this idea you’ll see, it’s massive. This is huge, so
you need to sign this non-disclosure agreement before
I tell you my idea.” So ordinarily I wouldn’t do this,
but we have this mutual friend and a I was on the spot
So, I was like, “All right. There you go. Here’s
your non-disclosure agreement. What’s this great
idea?” He said, “Okay. You ready? Online dating...
And I went, “Yeah?” And he said, “That’s it. It’s
online dating with music. This could be huge! This is
like a billion dollar idea, man! So I just figured if you
can make it, like if you could just program this thing
up, you get the website going, you just get it happening,
get some people to run this thing. I’m the idea
guy so we’ll go 50/50 on this since I came up with the
idea and you make it happen.”
And I said, “Wait. Is
there any more to it than this? Do you have any details,
any plan for how this is going to work?” And he said,
“Dude, online dating with music, duh. This is huge.” I
said, “Okay. Hold on. We’ve got to back up here. You’re
missing the point on something.” I said, “Let me draw
you a little chart.” And I grabbed a pen and a piece of
paper and I said, “Okay. Let’s say that give a value to
the worth of an idea. Let’s put bad ideas as -1, an average
idea, we’ll give it a 5, great ideas, let’s give it a 15,
and an amazing idea, let’s give it a 20...”
The thing is, though, some ideas are worth tremendously a lot. If a friend tells me that Reddit ads or StumbleUpon ads are absurdly cheap for the value of good clicks in a demographic similar to my own, that's worth a lot.
So I'd ask a question --
Is the idea similar to finding a gold mine, or building a factory?
It still requires skill to get the gold out of mine, but at least half of the work is done once you find a gold mine.
A factory, on the other hand... regardless of how good of an idea it is to build, market, ship, and sell products from a factory, that's all execution-oriented.
Discovering a gold mine is 50%+ of the work of getting the gold. Having an idea for where to build a factory, doing what, is maybe 1% of the value of a completed and functioning factory.
Gold mines are places where there's already recognizable money, in a field or specialization that either you can already quickly exploit, or the value is readily known to almost everyone -- so it would be easy to recruit relevant partners.
As a percent of all business ideas, gold mines are rare. But actually, there's quite a lot of them.
For instance, I've met a number of German and French people lately. Apparently, there's all sorts of France/Germany friendship events where they send students, or young people, or scientists from one country to the other for conferences, tours, etc.
Many times these events are poorly publicized, so just knowing about one would get you a free trip, some contacts, and a little spending money. Just the idea, just knowing about one of these opportunities is half of the value of getting it. Filling out an application and following up on the phone isn't hard.
There's a variety of classes of deals like this, where just knowing about it has tons of value. If a developer is pre-selling units to meet a regulatory or bank requirement in the start of a building boom, just knowing the developer or knowing of the developer could be enough to turn almost a guaranteed profit. I saw this firsthand in Dubai a few years ago.
HP fire-sold the Touchpad for $99 last year, which immediately resold for $200+. Just being clued into the instant arbitrage opportunity would have been half the value. Ordering two from online, and then reposting to Ebay or whatever would be trivial.
Finding an advertising channel that's extraordinarily high-quality at unusually low cost is rare, but very valuable.
Most people would get this wrong, as the majority of ideas -- even great ideas -- require putting dozens of pieces together. Building permits, bank loans, engineers, architects, raw material suppliers, assembly lines, getting the right people working there, careful accounting, inventory management, shipping, etc, etc, etc.
An idea for the best factory ever would still be only 3% of the battle won. But occasionally -- rarely -- there's opportunities that just knowing them is more than half the battle. Gold mines. They're not worth chasing after, but are definitely worth paying a bit of attention to if you're surveying the landscape anyways.
The main that occurs to me is that gold mines aren't scalable. I know guys that can slide by without any real skills just based on connections and throwing business deals together. Let's use the goldmine analogy and call them "prospectors."
They can keep sliding by, but that's not scalable, it's not a business, it's a deal. Just like reddit or stumbleupon ads. It may get you a good solid win, but it's not scalable.
Then again, if your network was big enough and of high enough quality, maybe it is scalable.
How do you feel someone would transition from this position to a more favorable one?
I do feel there is a need for someone to set up deals. I would assume the natural progression would be fulfillment of the deal.
Looking back now, I've sort of changed my stance. If you can close deals and keep closing bigger and bigger deals, maybe it does scale.
I do still know a lot of people that wheel and deal but aren't really going anywhere tehy're just skating by until they need cash and then make another deal. Nothing wrong with that. But, I wouldn't consider it a business.
*...which has now promoted the idea from purely an idea to an idea with the early stages of execution.*
A distinction worth investigating is that a goldmine is a proven asset, right? Sure it takes effort and infrastructure to get the gold out, but the value of ownership is derived from the guarantee that gold is valuable. Using this as a metaphor for an idea presupposes that the idea has value once executed. So to make this analogy work we would have to assume the idea has been market tested, which has now promoted the idea from purely and idea to and idea with the early stages of execution.
A more accurate analogy would be that an idea is like a plot of land that you hope has gold in it. You don't know till you survey and test and then you don't make money until you actually mine. Land like this, while more somewhat more valuable than any other plot of land is still relatively worthless compared to an established goldmine.
The goldmine analogy is palpable, BUT in the case of the mine/property, mineral-rights and land-rights are assigned to only one party. Having the legal and exclusive right to exploit physical properties (esp. when that property has value in the marketplace like gold would) is of course very, very valuable. No one can encroach on your territory for fear of legal repercussion. Aside from defensible patents, I'm not sure an "idea" can ever be treated as a goldmine. No one can be assigned the exclusive right to exploit an "idea". Perhaps film producers may have this right, but even in their case, they've essentially gambled on the bankability of someone's creative mind, and placed a bet, so they might be better thought of as the investor, and not the "idea-holder". I think a better goldmine analogy would be to think of a person's past performance (rather than a single idea), hunger, execution, determination, network, and get'er done attitude as the goldmine - one that will deliver gold more often than not with respect to the rest of the population at large.
I like both perspectives and would go so far as to unify them: the market for the idea is the goldmine and bringing it to market is the factory/execution.
"just knowing the developer or knowing of the developer could be enough to turn almost a guaranteed profit. I saw this firsthand in Dubai a few years ago."
I've definitely seen this a lot, I've also seen he same companies crash and burn once the boom / relationship fades.
Nice points, I've always felt Ideas are often over valued.
I don't really know how to elaborate on the topic, but at a glance my gut feeling is you're mixing up knowledge with idea.
I think, overall, there's a lot less controversy over whether knowledge is worth money vs whether an idea is worth money.
I think, to go on with your analogy, knowledge would just be the tools and technology you have available to extract gold from the mine or the machines you have running on your factory.
Then you can get something like "I know a really good advertising channel" and "dating with music" and figure out whether they seem like the tool with which you'd extract gold (the former) or the actual gold (the later).
And then I think sirvers' advice finally makes sense again.
I updated My Time/Habit/Life Tracking about three weeks ago. In it, I added a "Challenges" section:
——————————————- CHALLENGES: Did I start the day in my planner instead of online? Did I only check email when I was ready to write back immediately? Did I clear my active to do list before any screwing around? Did I avoid getting into arguments with idiots online? Did I only check a site once, then done with it? Did I prioritize books/good learning instead of mindless surfing? Did I avoid sugary food? ——————————————-
Note one in particular - "Did I avoid getting into arguments with idiots online?"
This can be hard to do if you're on a discussion site. But now, I think I've got a rule that covers when to discuss and get into it with people, and when not to.
The rule - no arguing with peasants.
It is Sunday afternoon and I am drinking tea. Just sitting down to write. When I write, the topic has usually been made clear to me earlier in the day, or perhaps the day before.
But not today. These writing sessions are always the most interesting, because of a few reasons.
As you start, you have no idea what’s going to come out of your fingers. But you don’t want to go on with meaningless ramblings, so you force yourself to enter into a sort of flow state very quickly. You get better at it with practice.
Two days ago I stumbled upon a thread on Quora about writing advice. Someone said that you should never write about things you thought up beforehand. Everything you write should be in-the-moment writing, because everything that isn’t is a fabrication of ego.
First, I disagree with the use of the word ego, but I know what he means and I understand what he’s saying. I don’t agree though. All writing isn’t made equal.