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8 stupid frat-boy business ideas

Ramit Sethi

First of all, let me say that I loved writing this.
See, when I was in college, I would walk by the Quad and see a poster for some new book-exchange service literally every week. “SCREW THE BOOKSTORE!!!” it would say. “TRADE YOUR USED BOOKS WITH THIS NEW SERVICE!” The idea is that bookstores charge too much, so why not give the power back to the students and let them trade books at the end of the quarter?
Perhaps one reason could be that this is one of the worst business ideas on Earth–yet it persists in thousands of colleges with many students pursuing the same dismal goal. Why?
Because it’s a stupid frat-boy business idea.
A stupid frat-boy business idea is an idea that sounds attractive on the surface, but ignores the graveyard of failures before it. It’s usually hatched when a few guys get together, drink a lot, and end up talking about stuff that “should” exist. Sometimes the discussion gets entrepreneurial and they talk about a few ideas, which one of the guys will pursue the next day (when everyone else forgets about it).
“No! Don’t do it!” I want to say. Do something else, but not that. It was a stupid frat-boy business idea. But I can’t, because this frat boy probably isn’t reading my blog (also, he is imaginary).
Now, a quick caveat: I totally admire people who take ideas and do something with them. It doesn’t matter if you make money or not for your first project; the biggest problem with doing anything entrepreneurial is getting started. I’ve written about this before. But frat-boy business ideas are expressly started to make money–they’re portrayed as “companies”–and they ignore the fact that these ideas hardly ever succeed. If you’re going to do something cool, why pick something that dooms yourself to failure?
Here are the worst stupid frat-boy business ideas:

  • Book exchanges. Without fail, college students love to complain about textbook prices. Also without fail, some joker on every campus in America will start a book-exchange service this week. Saving money and screwing the bookstore sounds nice, except for a few problems: Book exchanges are worthless unless there are a lot of people on it; this chicken-and-egg problem is really hard. Developing a website for this isn’t trivial. And although the creators love to proclaim this a “company” instead of just a project, they usually forget to create a way to make money. Finally, one minor point: NO BOOK EXCHANGE HAS EVER REALLY SUCCEEDED. I HATE TO CRUSH DREAMS BUT PLEASE FORGET ABOUT THIS.
  • T-shirt companies. We all love to think that our clever ideas will be so loved that thousands of people will buy t-shirts with them, but there are already millions of clever shirts out there. Seriously, search for funny t-shirts.Having started a t-shirt company myself (Bittershirts.com), I feel entitled to spend a little time on this. When I started mine, it was for one reason: To put some funny shirts out there and build my personal brand. 2 out of my 3 shirts were failures, but the 3rd one took off almost exclusively due to luck. THERE IS NO MONEY IN T-SHIRTS. It’s a hopeless business with no margins and horrible inventory problems. “But BustedTees does it!” you might say. Yeah, and I beat my friend Doug in H-O-R-S-E five years ago. That doesn’t mean I can be Michael Jordan.
  • Coffee shops / restaurants. Although few college students actually open coffee shops, many of the people who do are suffering from the same stupid frat-boy business syndrome. It goes something like this: “Oh, a coffee shop! How cute! We can make a cute little place where people come and drink espresso every day!” I would be more than a little hesitant to invest in a business based on cutey feelings–especially one with high fixed costs, labor costs, and customers who (1) won’t switch from their regular place and (2) if they do, they’ll sit at a table the entire day. Also, see one man’s story of how opening a coffee shop ruined his life. Basically, this coffee example consists of any business idea that centers around a romantic idea (independent bookstore, bed and breakfast, etc).
  • Anything that is “the Netflix of ___,” “Flickr + ___,” or “Facebook + ___.” These companies had wild success, and now there are 50 million copycat companies. You are one of them. Also, maybe we’re just not ready for ideas like “the Netflix of furniture!” and “Flickr + Tic-tac-toe.”
  • Ideas that compete on price. I was worried about putting this one down until I heard a friend of a friend say he was going to start a service to compete with Wal-mart on price. WAL-MART, THE WORLD’S MOST TECHNICALLY ADVANCED COMPANY IN LOGISTICS AND PRICING. Anyway, listen up: It seems like competing on price would be a good thing, until you realize that when you lower the price, you usually make less money. People are completely willing to spend more for other things like design (Target), service (Ritz-Carlton), hot people (Hooters), etc. Don’t compete on price. Once you factor in things like time and gas costs, it’s very hard to compete against the scale of bigger stores. Also, you’ll get the worst clients–the ones you’ll have to pry money from–frustrating you with your low cash flow.
  • Discount cards. College students love to try connecting local merchants to their campus, negotiating deals, figuring out how to print a real laminated card, setting up a website, and more. They just forget one thing: customers. Hardly anybody buys these things, whether they save money or not. “But mine is the best because…” frat-boy creators say. Well, do they own a discount card?
  • Yet another social network. After Facebook took off, you could stand in line at any Silicon Valley McDonald’s and hear 15 people talking about starting their own social networks. “It’s different because…_____” they would say. AND YET, THEY’RE NO DIFFERENT! The chicken-and-egg problem is pronounced here, with fickle users who go from one site to another like roving vikings. (Remember, just a few years ago we all thought that everyone would be on Friendster forever.) Also, it’s not popular until it’s popular. In other words, early growth doesn’t mean much for later growth, and there’s a lot of luck involved. Will there ever be another social network? Of course. But the chances any individual one will take off are infinitesimally small. Just ask yourself: Would you use another social network?
  • Anything where you plan to make your money exclusively from ads. If your business consists of doing something and making money off ads, do some research and you’ll discover that for most situations, ads don’t pay very much. Really.

The point isn’t to mock these ideas. Well, yeah it is. If you’re going to do something entrepreneurial, DO IT!! Don’t let some guy’s blog post stop you. But don’t waste your own time. Learn from ideas that have failed and will continue to fail. Of course there will be exceptions, but you should try to get every edge to succeed you can. And if that means taking a few minutes to research your idea before you start, good. And don’t ever, ever start a book-exchange company.
Thanks to Chris Yeh and Noah Kagan for their thoughts on this article. Check out their blogs.
What now?
Read my section on personal entrepreneurship to learn about starting something cool.

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