Who is Mr Market?
Mr. Market is an imaginary investor devised by Benjamin Graham, Investor and author, in his book, The Intelligent Investor.
Graham describes him as a “hypothetical investor driven by panic, euphoria, and apathy making decisions as to his mood, rather than through fundamental or technical analysis”. He was explaining that it is these decisions that move the market no matter what your technical analysis is telling you.
Basically, this is the same in any market, it doesn’t matter how much technical research you do into your market, it works on its own and makes its own decisions.
This is why going to the market, is called asking Mr Market.
When do I ask Mr Market?
People keep showing me brilliant new products, then ask my opinion of them.
My reply is always the same, "I don’t know”.
Basically, I may think it is a great idea, but that doesn’t mean that it is, as it’s only my view, and I am not the market to which you are aiming the product.
The real answer to the question of how good your product is, is to ask Mr Market.
How do I ask Mr Market?
You must take it to your target market as this is the very best way to find out if you have a saleable product.
Now, the only way you will get a true answer from Mr Market is to ask for an order. You will only know your idea is a good one when your target market is willing to risk their own money to buy it.
Now it doesn’t matter if you don’t actually have the product or that it will take you time to deliver it. You tell them that it has been so successful that there is a backlog, and you will ship or deliver it as soon as possible and obviously will deliver first to those who have paid.
An example of asking Mr Market
An example of a company who did this successfully even though at the time, they were just two students. They had this idea for a product, but they weren’t sure how good their idea was. So, what did they do?
They set up a web site, the site went live, and they waited to see what would happen.
They were stunned, suddenly they were inundated with orders. Mr Market was telling them they had a product.
However, it gave them a problem, you see they didn’t have the product, but they had set up a PayPal account for the site. This meant that within a very short time they had something close to £20,000 in their PayPal account!
Rather than sending the money back they decided to build the product. So, they pulled the site down and got to work making their product in their flat! Additionally, it gave them the initial funding to allow them to confidently to start a successful business.
When Richard Branson asked Mr Market
Richard Branson asked the market when he launched his Virgin Galactic. He asked people to book a flight at £250,000 each. 86 people actually paid the £250,000!
Mr Market told him there was a market for civilian space flight, even at that price!
It also, as it did with the students, gave him a pot of £21.5M to kick off his business. Obviously, it wasn’t enough, but it was sufficient to give others the confidence to invest in the venture.
So, remember, next time you have a great idea ask Mr Market before you go forward, maybe he could give you the financial boost to fund the development of your idea.