
If you had 5 dollars and 2 hours, how would you make as much money as possible? - bhousel
http://entrepreneur.venturebeat.com/2009/10/30/start-up-studies-a-pop-quiz/
======
icey
I'm amazed by the number of people in this thread who have gotten the
challenge wrong.

They didn't only have 2 hours to conceive and execute their idea, nor did they
have to limit themselves to the $5.00.

They were given an envelope that contained an unknown amount of seed money,
and then they had 4 or 5 days to decide how to make money with it. They would
only have 2 hours once they opened the envelope to make as much money as
possible.

The challenge wasn't what people could make with $5.00, it's how the teams
dealt with a set of unknowns in order to make money.

(Edit: Someone disagrees with me, but I'm not sure why. If you watch the
video, it's quite clear that this is the case. I'm not just stating an opinion
here.)

~~~
nkurz
I haven't voted you either way, but from the video it's still not clear to me
whether the $5 was a known or unknown amount. I agree that the exercise makes
more sense if it's unknown, but I don't think it was ever clearly stated.

------
petercooper
If you're not thinking of watching the video, think again. Even if you watch
just the last two minutes. There's a good twist in the tail in the way the
most successful team made the most money :-)

~~~
zackattack
Can someone just spoil it please? I hate having to waste my time in order to
glean insights. Pareto.

~~~
nkurz
She teaches a class at Stanford and offers each team $5 of 'funding' in an
envelope. She tells them that once they open the envelope, they have 2 hours
to make as much money as they can.

She cites three teams' approaches:

1) First team opens a free stand that offers to check peoples bike tire
pressure for free, then charges $1 to inflate if necessary. This team changes
midstream to accepting donations instead of charging, and makes more money.
Lauded for rapid iteration.

2) Second team makes lots of reservations at local restaurants, and then sells
them to people waiting in line for same restaurant. Didn't use the $5 at all.
Lauded for realizing that the $5 constraint was artificial, and that using it
constrained their thinking.

3) Third team skipped the exercise, and sold their 3 minute class presentation
time as a advertisement to a local company. Made the most money. Instead of
presenting, they recruited. Lauded for realizing that the 2 hours was also
artificially hampering their thinking.

Personally, I found the presentation glib and condescending, and the solutions
immoral and dishonest. I'm hoping for good discussion about the issues here,
but I would not recommend the video.

~~~
seldo
See, the problem here is that she hands out two artificial constraints, and
then praises the teams who ignore the constraints.

1\. Used a device to measure the tire pressure and materials to build the
booth and signs. Did they cost less than $5? Maybe. Did it take less than 2
hours to create the booth, the signs, _and_ perform the services? Unlikely.

2\. Well done on finding something you can acquire for free and then sell.
However: did they make the reservations at 6pm and then sell them before 8pm?
If not, the process of making the money took more than the 2 hours allotted.

3\. You had two hours. Instead, you spent 2 hours talking to an advertising
company and then a week later you sold 3 minutes of your time. Total time used
to make $650: a week. In the real world you can't just discount lead time and
idle time; that's a mistake made by a lot of starving contractors.

The point of the puzzle is to work inside the constraints. "Thinking outside
the box" is a great skill and all, but basically all these teams are doing is
finding creative ways of breaking the rules. It means the puzzle isn't "make
the most money in 2 hours with $5", it means the puzzle is "find out how far
you can stretch these rules without being disqualified". Points for
creativity, sure, but that wasn't the problem.

~~~
teeja
"she hands out two artificial constraints"

But that's very important. People are constantly working under ... and handing
out ... artificial constraints. _Getting outside the box_ is one of the most
important lessons. Who could _possibly_ want to communicate but be limited to
only 140 characters?

The US spent a million dollars to develop a pen that could write in no-
gravity. The Russians used a pencil.

"In the province of the mind, what one believes to be true is true or becomes
true, within certain limits to be found experientially and experimentally."

~~~
netcan
Not using the $5 at all thinking outside the box is. You break a rule that
thought existed before you thought about it. It is a constraint on your mind,
not your world. This is a space pencil.

Using $10 instead of $5 is not thinking outside the box.

~~~
teeja
For some people finding fault is easier than seeing the point.

------
edw519
Just a few options off the top of my head:

1\. Email everyone I've done work for in the past 5 years, promising all of my
time on Mondays for the next year to the highest bidder by 2:00 p.m.

2\. Same as #1, but instead of the highest bid, the first $10,000.

3\. Same as #2, but $1,000. I will accept all checks received in the next 2
hours. What they will get: free use of my next web service for life.

4\. Tell my employer that unless he cuts me a bonus check for $10,000 in the
next 2 hours, I quit.

5\. Write a one page book, "How I Lost 50 Pounds in 9 Months." Make as many
photocopies as possible. Put on a pair of pants twice my size and sell the one
page books for a buck a piece in front of McDonald's or the food court at
lunch time. (I weigh 150 pounds.)

In all 5 cases, I leverage assets (goodwill & good health) I've already earned
in much more than 2 hours.

The $5? For the lunch I eat while my "assets" (hopefully) earn.

~~~
jcl
But with several of those options, you take on liabilities that may exceed the
money you made. By the same logic, you could use your two hours to get a
mortgage on your house. (And the last option sounds like fraud.)

~~~
PostOnce
You always see pictures of guy who are obviously tremendously muscular and who
have gained 30lbs of fat for the sole purpose of photographing it and losing
it again.

The diet ad doesn't say, Hey, unless you have 65lbs of muscle under your flab
and are able to devote several hours a day to working out, this 4 week
plan/pill isn't going to work.

------
mrduncan
Here is a link to the original Stanford podcast where this video is from:
<http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2219>

I really recommend the whole series also, they have had some excellent guests.
<http://ecorner.stanford.edu/podcasts.html>

Edit: Grammar

~~~
pcarmichael
Agree 100%. It's a great series with many good talks. One of my all-time
favorites is from Tom Kelley (IDEO) on being an innovator for life:
<http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2054>

------
stuartjmoore
Buy a box of Cokes, sell them individually outside the movie theatre, repeat.
Run when the management finds out.

I used to do this with Blow-Pops in middle school. You could buy a huge bag
for about $1.50, and sell each one for 25¢. Great profit margin.

~~~
fnid
I did the same with Now and Laters. Buying them in bulk and selling them
individually to kids at school.

~~~
BunkerHill
Same here and one classmate thought I was being crass. Or being a profiteer.

~~~
eru
Take it as a compliment.

------
amalcon
If the question is what I would _actually_ do, I'd probably offer "computer
tune-ups" as someone else suggested. That, or set up and secure wifi routers.
A lot of people are afraid of wifi routers because they've heard the person
next door can get them in trouble; solving this problem is of definite value
to them. Once I did this for someone whose house was big and radio-interfering
enough to require repeaters; I made $100 in an hour.

If the question is what would make the most money, I'd print up a bunch of
official-looking flyers and an official-looking record sheet, go to some high-
traffic spot, and collect "donations". This is very unethical, but it probably
earns money the fastest of anything that can be set up so quickly.

~~~
bhousel
Actually in the video, one of the teams did something similar. They went to a
highly trafficked area on campus and offered to test bike tire pressures for
free, then fill the tire up for a dollar if necessary.

They had a great response from this, but soon learned that they could make
even more money by asking for a "donation", instead of a dollar.

------
bonsaitree
This is merely an academic "bounding/framing" exercise in every sense of the
word. Pure entertainment.

A better measure of business creativity would be to allocate the same fixed
budgets of labor and materials to all teams and record revenue, profits, and
judge the sustainability of the solution at the end of a more reasonable
operational timeframe--say 1 week.

The "winning" teams operated under entirely different working budgets for
materials and labor during their prep time and 2 hour window.

It's made even worse as the professor immediately demerits the 'party' example
due to the costs of the party supplies and setup. Apparently, Stanford student
time & attention is "free" for one team, but worth $650 for the other.

------
ErrantX
Apparently by ignoring the money and the time limit...

Personally I found the latter 2 solutions pretty unimaginative in ignoring the
$5. If the exercise is to maximise the $5 (a much harder task it seems) then
they seem to have failed.

~~~
nanijoe
But to maximize the $5 was NOT the exercise...

~~~
ErrantX
no, but it would have been a lot more impressive.

If the point was to show that artificial limits were, well, dangerous I dont
think it was made hugely well.

------
RiderOfGiraffes
I'd buy balloons and a bag of rice, make five juggling balls and busk. The
balls take about 30 minutes to make, I'd get about an hour of busking, so I'd
make about $40 as a one off, maybe $100, depending where I am.

~~~
fnid
Why would you waste 25% of your time making balls you could buy for $5? Go to
a 99 cent store, there are tons of balls in there for under $5.

~~~
RiderOfGiraffes
Well, since you ask, juggling balls that you can buy for less than $1 are
crap. Very, very hard to juggle five with them. Good juggling balls in the UK
cost upwards of ukp3 each, so that's about $10 for five, and you can't buy
them in your corner store.

------
giblets
Teacher: "And the TEAM that made the absolute most MONEY challenged absolutely
every assumption and managed to make $5000 in the two hours."

Student: "How?"

Teacher: "Prostitution."

Student: "Who was in second place?"

Teacher: "The team that robbed a convince store."

~~~
jrockway
A "convince store"? I think I am going to open one of those... then I can just
convince someone to give me $10,000 or whatever.

------
billybob
#1. Buy a hammer. #2. Threaten people with it. #3. Take their money. #4.
Profit!

I kid!

~~~
releasedatez
Love your humor.

------
araneae
Prostitution.

------
ankeshk
1.

Trick 1: Forget about the $5.

2.

Trick 2: Forget about providing the actual service within those 2 hours. Use
the 2 hours just for doing the actual trade.

3.

Then sell something before you buy it. If I was given just 2 hours, I would do
quick brokerage.

Hour 1: Find a group of people who wants to buy laptops* at a decent price.
Get their configs down and get a commitment.

Hour 2: Find a seller who will give the best price on bulk laptop purchases.

*Laptops because I think it has high profit margins. But if finding a group or a business that is willing to buy laptops is hard - I would switch to some easy product - like movie tickets.

~~~
idm
... and you've just created an inductive proof for how the US financial system
collapsed.

Don't get me wrong: I think step 3 has a good chance of working. BUT if you,
like your customers, assume that a commitment is equivalent to the actual
asset (i.e. the laptop) then you are vulnerable to defaulting on YOUR
commitment if and when you cannot deliver the asset.

How might that happen? Imagine you commit to purchasing laptops through a
broker, exactly like yourself, who has no laptops to sell. This happens all
the time (e.g. "just in time" ordering) and it results in delays, angry
customers, and in the case of the US financial system, systemic fraud,
corruption and failure.

Naked short selling is surprisingly similar to your strategy:

<http://en.wikipedia.org/wiki/Naked_short_selling>

~~~
ankeshk
While in theory you are correct, there are a few points to ponder upon:

Laptops are not like stocks or other exchange commodities. As in, their prices
won't fluctuate like crazy (unless of course you manage to get pre-order
commitments to like 10,000 laptops.) At the scale we are talking about, we
have a pretty good idea of what price discounts we'll get. And more
importantly - who will be able to deliver them well.

Its important to keep scale in mind.

~~~
idm
Agreed - delivery is the important aspect, when it comes to just-in-time order
fulfillment. If they don't deliver, then you don't deliver either.

On your last point, I agree again: scale is critical. You describe something
that might work once, given that there are no supply chain screw-ups or
customer service problems. At the scale you describe, you can probably absorb
any costs associated with these problems, but you will eat into your time
and/or profit to do so.

My whole point is that the risk doesn't disappear just because you haven't
invested any capital; you've just shifted the risk.

------
nazgulnarsil
if we're going for outside the box thinking I would buy a homeless person a
meal and claim the satisfaction was priceless. since priceless > $650 I win.

------
dpcan
I am now thinking about every "problem" in my life, its borders, and whether
those borders mean ANYTHING. Is everything this artificial?

------
odvious
Get as far as you can on $5 of gas and drive to friends and family's houses
running msconfig and cleaning up crapware to make their computer run faster.
Easily $20 - $40 a pop. Protip: reinvest a little profit into more gas, make
even more money!

~~~
jodrellblank
I'd be surprised if you could thoroughly do one in three hours.

------
timf
Since it's a video, I will risk ruining the 'surprise' for you since it's hard
to scan a video. She says the most successful teams didn't really use the $5
because it was a limitation, they broke out of the standard "framing" of the
problem.

~~~
jrp
So, the 2 hours is more important than the 5 dollars? I did get caught by the
framing, but in retrospect I should have been tipped off by the fact that most
wages are > 2.50/hr.

~~~
timf
Yeah the 2 hours plus their "skills and creativity." One of the examples she
liked the best was a team that sold their class presentation slot to a company
that wanted to pitch to business students.

~~~
Oompa
Not just the one she liked the best, the one that made the most money. Company
paid $650 to give a 3 minute pitch to the students.

------
10ren
I am always surprised by the power of framing.

It's like a weak form of the Sapir-Whorf Hypothesis, where language shapes
your thinking.

nb: it's "always surprising", because that is the nature of framing and then
noticing the frame...

------
ankeshk
Or the other thing I would do is - organize an auction.

1\. Source products from an auction company on consignment basis.

2\. Find an event happening in town and pickyback to it - hold your auction at
that event (with permission) or outside but very near the event (with no
permission).

3\. Auction the stuff. Anything over the reserve price = profit. Anything
under the reserve price = sale canceled.

Sourcing products within 2 hours from an auction house is hard though - unless
you already have a relationship with them before. But given a bit more time -
and this is a good idea.

------
ilamont
Set the kids out front with as much lemonade and cookies as $5 will buy.
Pretty sure they could at least double that $5 in two hours on a warm
afternoon with lots of passing traffic.

------
WinBerry
She published a book called "what I wish I knew when I was 20". If you like
the story, you'd probably enjoy the book as well (the $5 funding story is in
there). It's a good motivation recharger for those entrepreneurs in the thick
of it - get's you pumped up to innovate. Also, might make you want to go to
the d-school at Standford because a number of stories are based on her class
there.

<http://tinyurl.com/yzj5hlj>

*that's my shameless amazon referral link to the book (muahahah!)

~~~
bhousel
Thank you for the suggestion and mini-review, added it to my wish list.

------
quellhorst
Spoiler: The team that won got Frog Design to pay $650 for the students to
give a 3 minute presentation to the class.

------
rhr
Just an idea, sell lottery ticket, 50 cents per ticket and winner gets $5.

Need to make some assumptions and do some calculations to figure out the
optimal way to price the ticket.

Also, we can ask people to buy ticket in advance, then use that money as new
prize and lottery that again. Sounds like ponzi, but in fact more like the
fractional reserve system our banks use ...

not sure whether this will really work, just an idea ...

------
fnid
The real lesson here is: Break the rules.

The rules were, 2 hours and $5. No one spent only two hours and only $5. The
first suggestion from the class was a $50 house party. Tire pumps cost more
than $5. The restaurant reservation scheme occurred the next weekend.

The last, most creative team was perhaps the only one that actually followed
the rules, assuming they sold the class time in those two hours.

------
joshu
You have five dollars, two hours, and a three minute slot with a room filled
with Stanford students.

~~~
CamperBob
And my axe!

------
ujjwalg
In short: Entrepreneurs should "think outside the box". Don't be scared of
competition/constraints.

------
gfodor
Use the 5 dollars to buy a case of Mt. Dew, hop onto eLance or mech turk.

edit: Make that Red Bull, time is money.

------
stuartjmoore
Buy a handful of cheap, blank, brandless t-shirts, write my name all over them
in bleach, sell them as designer t-shirts to celebrities.

------
lazyant
Before watching the clip or reading the comments: I'd use the $5 to have
coffee in some posh hotel or something and try and network.

------
aplusbi
Sell frozen orange juice futures.

~~~
jasonlbaptiste
Actually oranges and extremely cold winters heavily impact businesses. Jamba
juice 2 years ago stopped carrying fresh squeezed OJ and smoothies with orange
juice in them were 25 cents more.

~~~
aplusbi
I was making an obscure movie reference.*

*Trading Places

~~~
anonjon
that's hardly an obscure reference.*

*or is it

------
tybris
That's really worth watching.

------
vlisivka
First team: regular work. Second team: speculation. Third team: ads.

Where is direct marketing team?

My solutions:

Receipt one: * by bunch of cheap sport items; * walk to the park; * lease
them; * hire and teach other people to do that instead of you for half of
income. (Tested).

Receipt two: * by a sport item (e.g. ball); * walk to the street; * encourage
people to play a casual game with you, alone, or with other people; * hire and
teach other people to do that instead of you for half of income. (Tested).

~~~
FreeRadical
i doubt anyone will pay you to play a ball game with you just off the street

~~~
wgj
He claims it's tested. Seems improbable though. It would be worth hearing the
details.

~~~
vlisivka
See 2 year old sample photo here:
<http://sites.google.com/site/vlisivka/zatoka>

------
anonjon
Eh, these all seem to violate the rules.

They have time to make money from 2 hours after they open the envelope. If you
make your money outside of that time, how is it supposed to count towards the
money that you made for the project?

Why couldn't they just never open the envelope and work 9-5 jobs for a couple
weeks? Then say 'HAH! see! we made 2,000 bucks each!'

~~~
eru
Yes, but you have to present next week.

------
GrandMasterBirt
Totally worth the time. But its great, instead of thinking of what you can do
with what you're given, think of what you can do with what you already have.
The funding money and time you have to do anything is only there as a buffer,
a push in the right direction if needed, but that money is not there to fund
your work, your ideas are.

------
CamperBob
Easy... I'd buy a Sharpie, a piece of cardboard, and some ragged clothes at
Goodwill, and stand out on a street corner. It's not uncommon for bums to make
upwards of $200/day around here.

------
chrischen
In the real world you probably wouldn't have constraints unless you were
working for someone.

~~~
chrischen
Actually, chris, you wouldn't have externally mandated quantitive constraints.

~~~
chrischen
The restraints would not be mandated. You can choose to ignore them, but that
would mean you would just fail.

------
zandorg
Put it on red on a roulette wheel! Then you have 1 hour 59 to regret the 1
minute when you lost the $5.

------
jhrf
Did anyone else find that women hard to listen to? She had a jarring quality
to her presentation. I'm glad I wasn't there for an hour!

------
buymorechuck
My iPhone app, EasyPlay, a gesture-based iPod controller, is on sale for
$0.99. Or, if you like natural language processing, check out iRhyme, my
iPhone NLP rhyming dictionary.

EasyPlay: <http://itunes.com/app/easyplay>

iRhyme: <http://itunes.com/app/irhyme>

My main point is that for 5 minutes time spent, a revenue stream is opened up;
an efficient conversion of units of work time to revenue potential. (given
I've already invested several months in these apps). The only risk was having
this entry be downvoted for self-promoting on HN, since the rank is now at -4
points.

I'll report how successful this experiment was tomorrow.

