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Lucky or Smart
There's a formula for creating good fortune in business. Here's how one entrepreneur came upon it.
Published January 2005
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BUY A REPRINTMy career from ages 18 to 28:
In 1991, as a college freshman, I had an idea for an online service offering "real life" education to college students: practical advice about jobs, personal finance, and health. I made the simple observations that no one was teaching us these subjects in the classroom, and that computers -- rather than books or TVs -- had become the primary medium of communication and entertainment.
During my sophomore year, Dick Sabot, a very smart Oxford-trained Ph.D. in economics and the professor of a class in which I received a B-minus, agreed to collaborate with me on my concept. He did so not because I was his best student, but because he had had a near-death experience during which a higher power advised him to do "something different."
By 1994, when I graduated from college, our project had indeed become something different: an Internet start-up company we named Tripod.
Using what little cash I could raise from friends and family, I hired a team of computer programmers. I did this because I did not know how to install a web browser on my own computer, which is a significant barrier if you plan to run an Internet company.
Unbeknownst to me, and surely with some sort of anarchic motive, these lawless, long-haired, multi-pierced, tattooed, incredibly charming and smart hacker hooligans built a piece of software on Tripod that had nothing to do with offering practical advice to anyone. Instead, this software gave individuals the power to publish their own "personal homepages."
By 1995, the popularity of the Tripod Homepage Builder was growing rapidly and had far surpassed my original idea to offer college students "practical advice." It occurred to me that I might have a business on my hands. Having never written a business plan, I went to the local library and checked out a book called -- you guessed it -- How to Write a Business Plan.
In August 1995, Netscape went public and proved that Internet companies had value. Or at least proved that Wall Street investment bankers had convinced the stock-buying public that Internet companies had value.
One month later, I was able to convince New Enterprise Associates (NEA), one of the world's most respected venture capital firms, to review the Tripod business plan. They agreed to do so only because Dick's wife's brother's college roommate knew someone who knew someone at NEA.
NEA liked the plan because it mentioned the Internet several hundred times. It provided $3 million in financing.
By the beginning of 1996, one year after it was launched, the Tripod Homepage Builder had fundamentally changed the nature of consumer media. For the first time, anyone with access to a computer and a connection to the Internet could publish pretty much whatever they wanted; and anyone else with access to a computer and a connection to the Internet could view it.
By the middle of 1997, Tripod had attracted nearly one million registered members.
Tripod never posted a profit.
Tripod generated barely any revenue.
On December 30, 1997, in the middle of the stock-market bubble, I was offered $58 million for Tripod.
On December 31, 1997, I agreed to sell Tripod in exchange for $58 million in stock of a publicly traded company named Lycos, which at the time was an Internet company only slightly more stable than Tripod.
I agreed to a "lockup" that forbade me to sell all of my Lycos stock for two years.
Over those two years, I watched the value of my Lycos stock increase tenfold.
By December 31, 1999, at the height of the bubble and just a few months before the market crashed, I had sold nearly every share of my Lycos stock.
I invested the majority of those proceeds in bonds and real estate because they were the only two investment vehicles I could thoroughly understand. And because I needed a house.
By now, I hope my theme has become obvious.
Luck is a part of life, and everyone, at one point or another, gets lucky. Luck is also a big part of business life and perhaps the biggest part of entrepreneurial life. At the very least, entrepreneurs must believe in luck. Ideally, they can recognize it when they see it. And over time, the best entrepreneurs can actually learn to create luck.
Luck in business is different from regular old luck, like when you find $20 on the sidewalk. First of all, being lucky in business has an intoxicating underbelly called believing you're smart. No one actually believes that he should take credit for finding $20 on the sidewalk. But when people get lucky in business, they are often convinced that it is not luck at all that brought them good fortune. They believe instead that their business venture succeeded thanks to their own blinding brilliance.
