What makes an idea good?

I was somewhere in the Rocky Mountains when it occurred to me that I had no idea where I was going next.

Not just geographically. I had quit my Wall Street job right before the July 4th weekend, loaded my dog into the car, and pointed west with a loose plan: climb some mountains, finish the business plan I owed Bumble and bumble, end up at Stanford before the summer was over. The plan was almost done --- I'd promised it in exchange for a new laptop --- and I'd already survived multiple adventures above twelve thousand feet. I was twenty-six years old, unscheduled for the first time in my adult life, and the feeling was somewhere between exhilarating and terrifying.

That's when Jerry Gallagher tracked me down.

I was at a ranch in Colorado when his message came through, and I called him back from the kitchen. My dog, Moses, had jumped through my friend's window while we were out and I was trying hard not to get distracted by the blood he was still dripping while Jerry spoke. He had read my CarMax report --- the first Wall Street analysis anyone had written on the company --- and he'd spent the past few years watching CarMax expand. He wanted to fund a copycat. He'd found his operator: a young guy named Adam Simms who could run the business, but needed someone to write the plan and build the model. Jerry's pitch was simple. Adam was Batman. I would be Robin.

I re-bandaged the dog. I packed the car and I hit the road the next morning.

Copycats require operational excellence

Writing that business plan was straightforward --- CarMax had been the innovator, we were just copying it. The first question I always ask when evaluating a new business idea is a simple one: how different is this from businesses that already exist? Despite the mythology surrounding our current tech titans, the most successful entrepreneurs are often not innovators at all. They are operators.

CarMax had started as a skunkworks project inside Circuit City, the largest consumer electronics big-box retailer in the country before ecommerce killed it. The Circuit City model was to sell large-ticket goods --- TVs, stereos, appliances --- at thin margins and make all the real money on extended warranties. They looked at the used car market and saw the same opportunity: sell the cars cheap, make your profit on the warranty. My analysis had shown it was working, and by the time we wrote the business plan for our copycat --- Adam called it AutoChoice --- Circuit City was rolling out new CarMax stores as fast as they could build them.

Adam is a world-class operator and he did an incredible job executing a genuinely complex model. We built a used car factory just outside of Fresno where cars entered at one end and exited the other in like-new condition --- so well reconditioned that consumers were excited to buy them and we were confident enough to warranty them. Two years in, our first store was performing well and we were preparing to expand.

But by then it was 1999.

Every consumer venture capitalist had pivoted to ecommerce, and over the course of a month --- I honestly can't remember whose idea it was --- we started to noodle on a pivot. What if we could turn AutoChoice into an online business? We'd no longer need to invest millions in real estate. A website, small points of sale, a handful of cars on hand. Everyone loved it. We raised \$15 million, renamed the company iMotors, and I went in full time to drive the new strategy.

My sweet spot --- innovation with a twist

As I've come to understand, innovating on existing businesses is my sweet spot. You can sell the same products through a new business model or keep the old model and sell a new product innovation. Sometimes you can do both.

When I first decided to start Hairstory, I was excited to build a new business model. I'd been seven years out of operating companies, investing in consumer businesses for the hedge fund DE Shaw & Co., and I'd been watching the model we had used at Bumble and bumble --- selling professional haircare through salons --- disintegrate in slow motion. The Great Recession had devastated salons financially. Social media had enabled staff to steal clients and go independent. Ecommerce had killed channel exclusivity. I thought: what if technology could let hairdressers participate in ecommerce instead of getting run over by it?

That was before I was introduced to New Wash.

Once I tried New Wash, I decided to add a second bet: let's change both the way people clean their hair AND the way hairdressers sell products. It turns out, sometimes two bets are better than one.

Pure innovation is hard

Innovation is often conflated with entrepreneurship, but it doesn't need to be. Many of the most successful entrepreneurs I know have never innovated. Tevya Finger has built multiple incredibly successful haircare brands by executing a proven model better than anyone else. Friends of mine have built investment firms indistinguishable from their competitors and made fortunes. And Adam Simms, after iMotors failed, went on to build the largest automotive group in Northern California. He sprinkled in some internet marketing, but his dealerships succeed because they're well run --- not because they changed the business model. You don't have to be an innovator to be an entrepreneur.

But pure innovation --- creating something genuinely new --- is hard to resist. Particularly in a world where technological breakthroughs seem to generate billionaires overnight. What we don't see are all the failed innovators, the businesses that died trying. As I'll explore in the next installment, there's a structural reason why most innovative technology companies must fail.

I had to learn that one myself.

Within a year of discovering that my son Levi had suffered a stroke in utero, I took a sabbatical from work. It was a time of serious soul-searching --- I'll share more of that story another time --- and I'd decided that my job, for now, was to focus on caring for my family. One afternoon, letting my mind wander during yoga, I had a flash: what if there were a website through which the will of ordinary people could be used to influence those in positions of power? Democratized lobbying --- no political parties, no corporate funding. I'd collect opinions alongside demographics, anonymously, analyze them and present them to decision-makers. Crowdsourced policymaking. How would I make money? Sell access to the anonymized data.

I called each person's data their "Values Graph" --- a riff on Facebook's "Social Graph" --- and I became convinced that if enough people participated, I could improve the world and pay for my life. My favorite part was a data visualization I designed that mapped each person's values against everyone else's, creating clusters of like-mindedness and revealing how much more we have in common than we like to believe. I called the visualization The Orb and named the business VotaVox.

It was sheer hubris and a bad business idea. And I fell in love with it.

Two years later, with both VotaVox and The Orb built and our savings largely gone, I needed a job. That's how I ended up at DE Shaw. The problem with big ideas --- with pure innovation --- is that most of the time they require massive scale before they're worth anything at all. I didn't have the time, the money, or the knowledge to build VotaVox to that scale. So I quit.

A simple construct

I've now built or co-built six businesses. Three of them --- iMotors, Hairstory, Sans Savon --- sit in what I think of as my sweet spot: a proven concept with a genuine twist. Not pure imitation, which demands operational excellence I'm not sure I have in sufficient quantity. Not pure innovation, which demands scale and a tolerance for uncertainty that has broken better people than me. The middle path suits my temperament and my skills.

But I want to be honest about something. I didn't arrive here by reasoning my way to it. I arrived because the other options taught me their lessons the hard way.

VotaVox was pure innovation --- a big idea with no existing market, no proven model, no operational playbook. I fell in love with it the way you fall in love with ideas that are mostly beautiful in your own head. Two years later, having drained our savings building something that required a scale I couldn't get near, I had to walk away. The idea wasn't wrong exactly. The bet was just too large for me.

And iMotors --- which started as a disciplined copycat --- failed not because the model was wrong, but because we decided to layer innovation on top of operations at exactly the wrong moment. We turned a working business into an ecommerce pivot, watched the bubble burst, and folded. Carvana would prove the original iMotors thesis right fifteen years later and get valued at \$100 billion. Timing is everything. So is knowing when to leave a working thing alone.

What I've landed on, after enough failures to take the lesson seriously, is this: the level of innovation you choose determines the nature of the challenge ahead. More innovation means you need more scale, more capital, more time, and more luck. Less innovation means the competition is right there with you and execution is everything. Neither path is easier. They're just different kinds of hard.

The question worth asking before you start isn't is this a good idea? It's what kind of bet is this --- and am I the right person to make it?

The Orb lives

While writing this post I had an itch to scratch, so I took a break and pulled up Claude. I uploaded an old description of VotaVox and The Orb --- the data visualization I'd spent months and roughly \$50,000 building in 2009 --- and asked what Claude thought of the idea and how hard it would be to recreate. Then I hit return and went to make coffee.

Thirty minutes later I was staring at a fully functional Orb, populated with actual data, doing exactly what I'd spent a year trying to build. What took me months and a small fortune in 2009 took Claude a few minutes and cost a few cents.

There has never been a faster or cheaper time to test whether your big idea is actually worth chasing.

It hasn't become a better business idea. But I can't tell you how happy it makes me to see The Orb again. Click here and play with it --- answer the questions yourself to see where you land compared to me, then share it with a friend to compare with them. If that's not fun, I don't know what is.