Dullness is a Virtue

THE STORY
A friend of mine and I used to get into heated arguments about which one of us lead the duller life. We each thought we were pretty dull and so we would spend hours off and on for months trying to make our case as to why we each thought we lived duller lives than the other person. Come to think of it, I guess we would both have to be living pretty dull lives, if we wasted so much time on such a silly argument.

Every once in awhile, my friend would feel like he had finally come up the definitive point—the one that would unquestioningly prove that he was significantly duller than me. He would get excited and start saying things like:

“See, I win! You lose! I am the dullest person in the world! You’re not! I win! I win!”

After he got all of that enthusiasm out of his system, I would calmly reply:

“You’ve just said that you won a big contest. You claim to have won the dullest person in the world award. Well, that makes you a pretty exciting person, because now you are a big contest winner. I guess that disqualifies you from being the dullest person.”

After that, the whole argument would start all over again.

THE ANALOGY
Usually people are drawn to excitement like moths to a flame. If all the exciting and cool people have an ipod, then we want one too. We want to be where the action is. Dullness is something we usually try to avoid.

The same is true in business. Businesses seem to want to be where the action is. If all the cool companies are into Six Sigma, then we want our company to do it too. If the exciting companies are all diversifying to building HDTV’s, then we want to have a division building them as well.

The logic is simple. If this is a hot space that customers are flocking to, then there must be a lot of money here. Therefore, if I get to the hot space, then I will make a lot of money, too.

Yes, a handful of people make money in exiting areas. Most, however, lose a lot of money. The problem is that exciting areas are often among the most competitive. With all those companies flocking in to do business, the cut-throat competition chokes out the profitability.

In contrast, some of the most profitable places to be are pretty dull. If you want to make money, quite often dullness is a virtue. Getting excited over being the dullest company in the world might not be such a bad thing, after all.

THE PRINCIPLE
The principle here is supply and demand. As long as there is more demand than supply, it is relatively easy to make a profit, provided you have what is in short supply. Conversely, if there is more supply than demand, it becomes a buyers market and prices plummet. Take for example the HDTV industry. It seemed like the hot and exciting place to be. Consumer demand was rising quickly. With a growing market that large, how could you lose?

Well apparently, you can lose a lot. So many people jumped into manufacturing and selling HDTVs that it became a glutted market. You could even buy HDTVs at gas stations and supermarkets. Prices during the most recent Christmas season on HDTVs got so low that everyone started losing money on them. Sure, the customers were happy. It was the hot and exciting product to own, and they got it at a cheap price. The manufacturers and retailers, however, reported poor financials for the Christmas season due to the low prices.

In today’s business environment, information is easy to obtain; money is easy to obtain; manufacturing capabilities are easy to obtain. As a result, when something gets hot, everyone quickly knows about it and has the means to attempt to exploit the trend very quickly. Before you know it, the market is glutted and profits disappear.

While everyone was losing money on the HDTV’s who was making the money? It was the relatively dull people who got paid to install the TVs and make sure they worked. The glamour may have been in the TVs, but the money was in the duller manual work behind the scenes, like the Geek Squad.

This pattern has repeated itself many times. During the dot com boom, everyone rushed to where the excitement was—setting up cool web sites. Most of these companies lasted only a short period of time, never really earning any money and closing their doors once the venture capital money ran out. But who made money? It was Cisco Systems, the dull company that made the dull server boxes that were hidden in a room that nobody saw. All of these loser dot com companies bought lots of servers, making Cisco very profitable.

EBAY created excitement in the on-line auction business. It seemed like the cool place to be, because money was actually changing hands on the site. Customers were excited, so businesses got excited as well. Many companies tried to build their own on-line auction businesses and get in on the coolness of EBAY. After losing a lot of money, they all seemed to disappear. Who’s making money now? It is the dull little franchises, who make money helping people get their products onto EBAY and then help ship the products to the buyer. The low tech guys are making money while the glamorous high tech folks were losing their shirts.

Speaking of franchising, I once went to a seminar on franchising. The keynote speaker was someone who made a lot of money with his franchise. He said that when he first started looking into various franchise options, he was drawn to things that looked interesting or exciting. Quickly, he discovered that some of the best franchises were in areas that were pretty dull and unglamorous. He bought a franchise in janitorial services for office buildings and made a fortune. His advice to people in the seminar was not to go with what looked appealing, but go with the dull stuff—because that is where the money is. Fewer people want to do the duller and more mundane stuff, leaving more profit opportunities for the people who get into the business.

A lot of people seem to think it is cool to own an airline. The city where I live, Columbus, Ohio, is excited because the city formed a joint venture to run a commuter airline. Do we really want our mayors running airlines? But it is the exciting thing, and people are flocking to it. Yet it appears that long-term profits are very illusive in that industry. One place where making money seems to be occurring is in the relatively dull business of selling tasty meals for passengers to take on planes, now that the airlines have cut back on meals to try to make money.

Some of the most profitable retailers run some of the dullest stores—places like Wal-Mart and Walgreens. In the big malls, I don’t always see a lot of people carrying bags from the exciting fashion retailers. I do, however, usually see a lot of people consuming relatively dull stuff like hot pretzels and big cookies. Similarly, I was recently at a cool street art fair in Breckenridge Colorado. Not much artwork seemed to be selling, but the relatively dull stuff at the food concession stands nearby seemed to be doing a brisk business.

So next time you are looking for a new strategic alternative, don’t follow the pack to be in the center of the hot spot. It’s usually just a little too hot and you will likely get burned. Instead, stay on the periphery doing the relatively dull things that support the companies in the center. You get to stay warm, and you can stick around a lot longer without getting burned. Remember, dullness is a virtue.

SUMMARY
The laws of supply and demand have not been repealed. Quite the contrary. With the freer flow of information and money these days, it has never been easier for supply to chase demand. As a result, hot spaces get congested very quickly, making profits in the exciting spaces very difficult. Instead, it appears that the smart money should go into the duller businesses in the background, where you can create larger margins supporting the glamour industries.

FINAL THOUGHTS
Of course, the problem is that once everyone starts figuring out that the dull places are where the money is, they cease to be dull and start becoming exciting. Then everyone starts rushing in and destroying the profits. As in all strategic pursuits, you cannot stand still. You have to keep pushing the envelop of dullness.