I Prefer to be in the Business of Recycled Ideas!

So I recently read Lessin’ Lessons written by Bob Lessin. Bob is an investment banker and investor with an incredibly accomplished career including being the youngest partner (at 31) at Morgan Stanley and former Vice Chairman of Smith Barney and now currently Vice Chairman of Jeffries. I have had the opportunity to have gotten to know Bob over the last few years and from every encounter I always feel like I take away a little nugget of wisdom. So I am glad he got to write some of his thoughts about what he has learned in life.

Well, lesson #27 in Lessin’s Lessons is :

“27. There are no new ideas, just recycled ideas whose time has come.”

He talks about how before Facebook there was SixDegrees.com which he was a first round investor in. SixDegrees was launched a few month prior to AsianAvenue.com and I have also got to know the founder and CEO, Andrew Weinreich, over the years. The concept of SixDegrees had so many similarities to Facebook but failed to dominate the digital world as Facebook has because of reasons that were really out of its control. Whether it be the fact that digital cameras were not pervasive (do you think Facebook would be that interesting without photos), the lack of an online ad market to support it or because technology costs were 100x more expensive as they are now. As Bob states in his book “Ultimately, like most great concepts, they ran out of money”. The success of Facebook has less to do with truly innovative ideas but more on taking the lessons learned in the past and taking advantage of market changes that make the business much more viable.

Compare a business like Gilt.com. People in the U.S. think that this flash shopping site was a great innovative idea. The truth as reported in New York Magazine was how Kevin Ryan, former Doubleclick CEO and head of New York incubator Alley Corp, just mimicked an overseas success story. “Ryan was aware that a French company called Vente Privée was raking in money by selling fashion overstock, and he thought its business model could work just as well in America.” Trying to launch this type of business during good economic times would have been impossible because you could not get luxury brands to “play ball”.  This type of discount play was perceived to be too risky in terms of damaging their brands. However, the recession and how fast it hit us left these luxury brands with tons of excess inventory and in desperate need of cash. The time for Gilt had come and they took advantage of it. It is reported that Gilt.com is expected to generate over $400 million in sales this year. Pretty good for a business that is only about 3 years old!

So the lesson learned for me?  Look for recycled ideas that time has come.  These type of businesses tend to be a lot more capital efficient and therefore much more likely to succeed.