The best companies make life easier for the wealthy.
I left the South by Southwest Conference today thinking about how some of the best companies we know create products make life easier for those who could afford this luxury. A few quick examples: Apple, Rackspace, and NetJets. They're each companies valued in the billions, and that all comes down to their basic philosophy: make life less stressful. The big question is would you like to solve the stressful problems of the rich and famous or would you rather provide tools to a greater number of "cheap" clientele?
Apple: They've always competed against major players, but they're so popular because they make things easier and reduce stress. Macs don’t get viruses. PCs do. Last time I checked, Macs cost a million times more than PCs and with good reason.
Rackspace: Hosting frequently goes down. When you're guaranteed nearly perfect uptime, the customer's stress goes away. Sure, Rackspace has had their fair share of problems, but they still have a reputation for reducing the stress of companies and people who need 100% website uptime. They charge around 500% more than the average dedicated server provider for this assurance. While they cost a lot, it's probably more worthwhile than running your own datacenter operations.
NetJets: Flying is stressful. As you've probably seen, I hate flying commercial! NetJets reduces the stress of having to own your own jet by offering fractional jet ownership. They get you where you need to go without the stress of going through security or waiting in the airport. They cost around $500,000 to own 1/16th of a jet, which gives about 50 hours of flight time per year. I see the company as being similar to Rackspace because both cost a lot, but they give you grade A assurance for a fraction the price of owning your own jet. Not too bad if you ask me. Clients include Bill Gates, Warren Buffet, Tiger Woods, and my family. (haha, I wish)
I guess there's one major similarity among the above companies: they took a while to get to where they are now and spent millions to build their products as such. You can reduce stress at a much lower level and still make millions. Take for example Craigslist. It reduces the stress of having to go apartment hunting. eBay reduces the stress of buyers who can't find a product anywhere else. Simpler companies work too.
It needs to be understood that you don't necessarily have to start a company that "reduces stress" for the wealthy. As I've mentioned before, you have two types of companies: Companies that have mass usage and companies that go on the direct sale model. Rackspace has to manually sell its services, customer by customer. Facebook, on the other hand, has an automatic signup form. The company has very little two way interaction with its users. It seems as if "mass usage" companies can throw their products into the world without spending as much time and money. The direct sale companies require a much greater investment, but often yield much greater returns. This isn't always the case. Restaurants live by a direct sale model, but they don't prevent stress for the rich and powerful. There's a distinct difference. The best direct sale companies target the wealthy and only the wealthy.
I'll write a more thorough article on the different type of companies, what each type requires, and how to choose between the different types. In a nutshell, if you have very little time and money, it probably makes sense to throw a product out in the public under the "mass usage" model. If you have the funds (and obvious smarts,) make life easier for the rich and famous and you'll find yourself sitting on a pile of cash.
Jessica Mah is a 17 year old entrepreneur, blogger, and sophomore in college. She's currently the founder of a startup, managing editor at Startupism.com, and Jessicamah.com. In her free time, she enjoys the prospect of being an underage angel investor while partying like a rock star. (and traveling to random cities and checking into hotels while being underage)
