Lessons Learned from the E-Cigarette MarketO
I'm sure you've seen them somewhere before. Maybe you saw an ad at your local bodega. Or maybe you walked past them as they were sold at a mall kiosk.
Electronic Cigarettes, or E-Cigs, are a niche product in a growing market. The first time I saw an e-cig I couldn't help but laugh to myself. They just seemed so dumb, for lack of a better word. Imagine my complete and total surprise when reading a recent Bloomberg article that pegged the market for e-cigs at $300 million in 2012, with it predicted to grow to $1 billion in the next three years.
Now before I proceed, I want to be clear, this isn't a post about the wonders of the e-cigarette market. Rather, it has two focal points:
1.) Many people are too quick to be myopic and skeptical about the work and ideas of others
2.) It doesn't matter how silly a business idea may sound to you. What matters is that there exists a market for the product / service and a means to provide the product / service profitably
When I read the article on e-cigarettes, which is a pretty eye-opening read for someone who is both a non-smoker and an e-cig skeptic, it made me think of an interview that recently ran here on WSO. DonVon's interview with an ex-banking analyst who founded ThePillowPocket.
Why? Namely, because the same immense skepticism and attitude I had toward e-cigarettes was showcased in some of the responses to the idea behind ThePillowPocket.
Now, I'm not saying that the market for Pillow Pockets is going to explode and rival that of the e-cigarette market. Rather, I'm saying that it's foolish to knock any business that serves a market, assuming it's doing so legally and ethically. There may be legitimate questions about the product and the business model, but it's better to ask them to gain understanding instead of trashing the product outright because it doesn'tyour sensibilities.
It's far too easy, especially if you're in the bubble of high finance, to sit back and forget that there is an entire world of tastes that differ from your own. Instead of knocking a product idea because you wouldn't buy it, try instead to think about who would buy it. And, if a market legitimately exists, then think about how it could be served profitably.
Now, I might still personally find e-cigarettes to be stupid, but who cares? They aren't being produced for me, but for the millions of people who are looking for a safer alternative to traditional cigarettes. People are far too quick to hate on the ideas and work of others. It's a lot easier to criticize than it is to create something. Rather than hating on something, try and analyze and understand its potential merits.
When you're going down the Path on your way to Finance greatness, it's hard to imagine a way to make a living outside of banking, consulting, PE, or hedge funds. But, something I learned from my time in banking and PE, thanks to putting together countless pitches and reviewing hundreds of CIMs, is that there are literally millions of ways to make money.
Once you realize that and train yourself to drop the hater-first mentality, you'll open yourself up to a world of possibilities. Want to start a business but don't have any ideas? Open your mind. Spend some time reading and studying things that are outside of your usual comfort zones and areas of interest. Learn about something new and you might just come up with an awesome profitable idea that you can work on in your off-hours. But, as long as you're of the mind-set to dismiss out of hand instead of analyzing it critically, don't bet on coming up with any great ideas.
On the flip side, for companies like GroupOn, businesses that do more harm than good to their partners, that are built more on hype than anything else, and that have seedy management, bash away. My point is that it's important to have an open mind and to analyze the topic at hand before dismissing it.
Or else you'll risk doing as I did with e-cigarettes and completely dismiss a billion dollar market.