The photo for this article shows Gordon Gekko from Wall Street with a cell phone. In the 1980s, this was a toy for the super elite and rich. If you knew someone with a cell phone, they were loaded. Now, 2 billion going on to 4 billion people will have a cell phone. So, what do Uber, Tesla, and Apple all have in common with Gordon Gekko’s cell phone? They all started out as companies making products that were for the 1% and often touted as just “toys”, but now they are (or soon will be) available to the 99%. The most successful services start out as products for the 1%, but have visions that scale them to the 99%.. I apologize for the baity headline – by no means am I suggesting building a product that stays for the 1% forever, but starting with the 1% as your minimum viable market and then scaling your product to the 99% of the market via a long term roadmap.
Let’s take a look at how the three of these companies started:
Uber – Started as Black car on-demand because the founders wanted to be ballers.
Tesla – Started in 2010 with a base price of $109,000 in the US.
Apple – The original Macintosh in 1984 was $5,177 when you adjust for inflation.
This has all changed as UberX is now cheaper than a taxi, a smartphone is now $50 in developing countries, and Tesla is working towards a car that is under $30,000. Many of the greatest innovations in the world all start out as toys and get written off as “things for rich” people. The real magic is when you’re able to then scale to the rest of the world. Why start with a product for Gordon Gekko?
First off, you get to develop the right product without the constraint of price. If Apple had to develop the Macintosh for cheaper or Tesla had tried to make a 30k electric car first it would not have worked. Instead of focusing on the best product possible, they would have had to focus on making the cheapest product possible. That results in cutting corners on the product. To make a 10x improvement on what’s possible you can’t cut corners. Best of all, rich people are always willing to pay for cool new toys, so there’s going to be a market to test the kinks out.
Second, it lets you get a monopoly early on and have social proof. It’s tough to get a monopoly on a large portion of the population. It’s a lot easier to get a monopoly on 1% of the population with a new innovative product. Even if Uber was as cheap as a taxi at first, the social proof of “taking a ride with some random guy after pressing a button on your smart phone” would not have appealed to the mainstream. All the original riders helped pave the way for social norms. The same thing with Apple – no good software existed for PCs, but by the time PCs were affordable enough for the rest of the population many programs existed. Forward thinking ideas often go against the conventions of what’s normal in society. Making them as cool toys adds an aura of exclusivity and “desire”.
Lastly, it helps you think for the long term. Taking technology that’s a luxury and making it a commodity is what moves society forward. It can’t be done overnight and requires long term thinking. As an entrepreneur you should ask yourself “what is the most magical and outlandish service I can offer?” and then find the steps that will allow you to make that service available to most everyone in the world at an affordable price point. This isn’t a quarterly or even yearly roadmap, but one that’s going to require a blend of technology and operations over a long period of time.
I write this post because I think there’s a common negative opinion around “startups are focusing on problems for rich people” in the press. Startups have to start somewhere and the economics usually don’t work in our favor for mass production in the beginning. Therefore, many start by focusing on those with high disposable income. The real question we need to ask is – “what does the world look like if this service becomes cheap enough and widely available enough for the average person?” That’s where the magic happens and long term roadmaps are built.