This is a guest post from Jason Duff, founder and CEO of COMSTOR Outdoor.
Overpriced real estate. Insane work hours. Fierce competition against other smart people. Against huge odds, smart young people flock to Silicon Valley and other hubs to find the next billion-dollar unicorn.
I'm 34 years old, and I've taken the exact opposite approach in my entrepreneurial career. And it's worked.
Instead of starting a tech company, I built "old fashioned", profitable, multimillion-dollar businesses and helped create hundreds of jobs in my community, all before I turned 30. Today, I own 1,500+ self-storage units, 40+ commercial real estate properties, and 400+ outdoor advertising billboards.
Instead of moving to a major city, I stayed in the same 13,000-person community where I grew up in, Bellefontaine, Ohio.
Instead of competing in an area where there is a lot of hype and really smart competitors, I often have no direct competitors and the assets I buy are dramatically discounted.
Many people think my approach to business is outdated. But I've learned something fundamental about life and business that I think most smart people my age miss...
The Product Adoption Cycle We've All Been Taught Is Wrong
For more than 50 years, experts have examined the adoption of new products in a marketplace via a five-stage process known as Roger's Bell Curve, consisting of Innovators, Early Adopters, Early Majority, Late Majority, and Laggards.
However, as the resurgence of older technologies demonstrates, there is actually a hidden additional stage at the end that most entrepreneurs miss: the Retro stage.
Most entrepreneurs focus on using technology to innovate new fields, and they target innovators to adopt their products. I focus on reinventing existing markets and targeting retro adopters.
Most products, technologies, and cultural artifacts (i.e., songs, books, articles, and movies) don't just die and disappear. Instead, they can live on in the Retro stage as survivor technologies. Even if the market for these products might be smaller in the Retro stage than at their height, they still represent opportunities for reinvention and relevance. Importantly, they also often survive with fewer innovative competitors.
We see this same dynamic play out in other aspects of life. Many songs, books, articles, and movies get attention at first and then disappear--but a significant segment of such artifacts in our culture ultimately become 'classics.' There is actually a name for this theory--the Lindy Effect--which suggests that the longer an idea, a technology or a cultural icon survives, the more likely it is to continue to survive even longer into the future.
Examples Of Survivor Technologies / Products / Culture
Technology Is Not Our Savior
New technologies are critical. I believe we need them and benefit from them. I adopt new technologies in my businesses. However, we should not fall prey to what researcher and author of Good To Great, Jim Collins, calls 'The Myth of Technology Driven Change'--a breakthrough can only be achieved by using technology to leapfrog the competition. Collins' research shows that the CEOs of some of the most successful companies in the world did not rank technology as top factors in their success.
A great example of this is Warren Buffett, the best investor in the history of human civilization. Buffett did not make his fortune by investing in the latest technologies. He made his fortune by investing in the best businesses at the best deals. For example, in 2009, Warren Buffett purchased a railroad company in a $44B deal. In the last quarter of 2014, the railroad was Berkshire Hathaway's main single source of profit. In fact, the most profitable industries according to Forbes are ones like accounting, legal services, oil & gas, dentist offices, and commercial equipment rental.
As much as we look at how new technologies will disrupt old ones, entrepreneurs from my generation are well-advised to look at old technologies and cultural ideas that have staying power, learn from them, and reinvent them where it makes sense.
Here is the formula I recommend others copy or modify, which I use for all my businesses:
Step #1: Find priceless things that others have discarded.
In my real estate business, I look for historic properties to buy in my local community. As a developer, I've learned that older buildings are often made from higher-quality materials.
Many communities like mine have buildings that are very old. These communities are faced with the decision of whether to tear them down or to modernize them. In Ohio, I'd probably say 20% of the towns are tearing their buildings down, and 80% are choosing to save them.
Step #2: Buy them at an extreme discount.
In 2012, I bought the 10,000+ square foot, historic Canby Building in my community for $1. The building was run-down and vacant for nearly 30 years, and it was close to being demolished. Yet to build this building from scratch today, construction costs would be more than $4,000,000!
There are even deals out there where people will pay you to take it, because back-taxes are owed on the property.
Step #3: Repurpose them so they have a high economic value with positive cash flow.
I saw the Canby Building's potential and I saw its historic value for the community. Originally, it held a department store: many older residents have precious memories of going there to buy their first Easter dress when they were young, or a set of wedding china when they were married, or new drapes and a sofa for their first home.
Over the last few years, I've invested hundreds of thousands of dollars in the Canby Building to return it to its former glory and a place where people make new memories.
Step #4: Tell the story so others see them as priceless and important.
I also knew about the inspiring life of Edward Canby, the local businessman who built the building, whose story I could tell. Over the years, I've learned that a large part of value comes from the stories we have, not necessarily the objects themselves.
The Big Idea
So what can we - those of us in small towns - learn from the power of the Retro approach? Especially in a time where rural economies are struggling?
Jeff Bezos has the answer: innovate at the same time that you focus on what doesn't change.
Since its founding in 1994, Amazon has been built around the simple idea that people want to buy products as cheaply and as quickly as possible--a desire that won't change anytime soon.
"It's impossible to imagine a future 10 years from now where a customer comes up and says, 'Jeff, I love Amazon; I just wish the prices were a little higher,' or 'I love Amazon; I just wish you'd deliver a little more slowly,'" Bezos quipped during a 2012 discussion at Amazon Web Services' re: Ignite conference. "We know the effort we put into spinning those things today will still be paying off dividends for our customers 10 years from now."
Young entrepreneurs in small towns can learn from Bezos by innovating timeless aspects of their community. Small towns are often overlooked, and I think that is one of the reasons that small towns have huge opportunities.