Start Up Blog

Quirky fact: Boring = Profitable

Unless you are from the US – you have never even heard of any of the 10 oldest businesses in the USA. Nope, not one. There’s not a sexy brand among them. They include boring industries like, banking, ingredients, manufacturing inputs and insurance.

You can check it out by clicking here.

The important insight for Start Ups and investors is this:

The boring stuff is almost always more profitable than the sexy.

Why: Because exciting, sexy stuff attracts lot’s of competitors and people want to play there. They want to play there because it’s fun, it’s in the papers, it’s featured in business forums and leverages over-riding social trends. Then it gets busy and the cream disappears – (read here abnormal economic profits) . It’s no different to the house prices rising in popular suburbs and the yield declining. Simple economics discovered centuries ago.

So what? It’s vital we know the difference between sustainable & exciting. The most important factor for survivial is profit – end of story. Sure, profits can be made in any industry, but chances are there’s more profit in the areas everyone else forgot about.

4 Responses

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  1. Brent said, on September 10, 2008 at 1:19 pm

    And there are opportunties everywhere for entrepreneurs to make the boring sexy!

    Wikid campers is a good Aussie example. It’s hard not to note Virgin moving into many boring old industries (airlines, finance, telecommunications) and stamping their sexy brand.

  2. Steve Sammartino said, on September 10, 2008 at 1:53 pm

    Hey Brent,

    That’s exactly my point. When people come to play margins are squeezed. The Virgin Airline example is an intersting one…. Sure they’ve stamped their brand on things and added fun…. but financially in this arena they are struggling. They floated at $2.25 per share and as I write this reply they are trading at 55 cents a share. (Althought Airlines are typically not very profitable – not boring enough for profit!).

    Not sure on their banking / telecomm’s financial performance though?
    Steve.

  3. dr.dre said, on September 11, 2008 at 9:49 am

    See here for Michael Porter discussing why airlines don’t make money: http://www.youtube.com/watch?v=mYF2_FBCvXw (at about 2minute mark)

  4. Trent Schmidt said, on September 11, 2008 at 9:55 pm

    On the airlines, Warren Buffet has stated that [paraphrasing] ‘had there been a capitalist present when the Wright Brothers took flight, they would have shot Wilbur down…’

    I agree with Steve about boring = profit. However, it is also worth considering the ‘barriers to entry’, which if high enough, will restrict competitors entering a market – sexy or boring. Would you agree that ‘boring’ companies tend to have very high start-up capital requirements (starting up a bank, infrastructure company, airline etc – you need pretty deep pockets…)


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