Timing is Everything
A decade ago, I was an executive at an Internet startup named Mercata. Mercata was one of a couple of entrants in a field we had named "group buying." In practice, this meant there were limited time sales where the price of a product would fall based on the number of people who agreed to buy. Obviously the volumes were not large enough to get economies of scale of any sort, so they main advantage of the approach was viral marketing -- once you had agreed to buy, you had an incentive to get others to join in as more buyers would reduce your price.
The company eventually folded. The company was very professionally run for an Internet startup of the day, but it had a lot of overhead for its volume, and, as eBay would learn, a lot of people wanted to buy immediately rather than wait for some sort of auction to play out.
But it turns out that one of our biggest failures was timing. Recently, a company called Groupon has taken advantage of social networking that did not exist 10 years ago and has been quite succesful building a business using a very similar model to Mercata's. It appears that Google has just bought Groupon for $2.5 billion. Sigh.
This is not, however, even my largest financial missed opportunity. I still have in my desk a 1984 job offer from Microsoft, which I eschewed at the time because it paid less than my other offers and tried to compensate me in these crazy pieces of paper called "options." I once calculated the current value of the options just in the offer letter (ie not including any future grants over time) and their value was well north of any conceivable net worth I might reach currently.
richard:
Hold on, are you saying that the MS options were better that the 2.5 billion for mercata?
November 29, 2010, 10:14 amme:
Ah, you'd have fit right in here, Warren.
That said, I once turned down a small search company called "Google" because I didn't feel there was much of a growth opportunity in internet search. The opportunity cost of the decisions I've made completely dwarfs any net income I could possibly hope to make in the remainder of my professional life, too.
November 29, 2010, 11:03 amRob T:
I think we all have those missed opportunities to various degrees. It's a bit like a lottery.
But for the rest of us, we just have to find our own path, dig our own security, government willing.
November 29, 2010, 11:11 ammorganovich:
warren-
in a story that very closely mirrors yours a friend of mine who worked with jeff bezos at DE shaw turned down the opportunity to be employee #4 at amazon to found his own .com, a service matching people with questions they were willing to pay to have answered to experts who would make bids to be the respondent. it failed because ti was much too early. missing out on 8 figures hurts, but 9 really sucks. oopsie.
November 29, 2010, 12:59 pmTom Corbin:
Timing is, indeed, everything. This was the xkcd comic for today.
http://xkcd.com/827/
November 29, 2010, 1:16 pmTom Van Horn:
Warren,
Yes, indeed, timing is important, if not everything. As the founder of Mercata, I have been following Groupon and "We-Commerce" (or group buying) 2.0 for some time. To think we almost IPOed in early 2000 before the I'net bubble imploded (cavitation?).
All our patents, by the way, eventually were granted by the US PTO so I wonder if they will enter into the value equation of the group buying space...
TVH
November 29, 2010, 2:06 pmstan:
Warren,
Can you tell us the names of any stocks or real estate that you thought about buying recently and decided not to? ;-)
November 30, 2010, 6:26 amJim Collins:
I lent a friend $3000 in 1987 to help him start his video rental store. The deal was that he would pay me back $4000 in a year or I could have 10% of the business. Numb nuts here took the $4000. As of last year he has 24 stores, 5 shops and 2 paintball ranges.
That sitll doesn't compare to my first CO in the Navy. He had a letter framed on the wall of his office. Some mornings he walked in and pounded his head into the wall beside the letter. The letter was given to him by two neighborhood kids who were trying to raise money to get their company started. The company was Apple. The letter was one of the first written using Apple as the name of the company. At the time (1983) 5% of Apple would have been worth around 50 to 100 million dollars. The letter in 1988 was worth $40,000.
November 30, 2010, 6:51 amepobirs:
Was the Mercata site once called MobShop? I used that one for a while.
November 30, 2010, 9:40 am