Key Moments
These AI-proof businesses can make you $10M/year
My First MillionKey Moments
Businesses focused on community and niche collector markets can generate millions, even in the age of AI, by leveraging human connection and the 'whale' phenomenon.
Key Insights
NADA, an association for auto dealers, generates $13-15 million annually through peer groups that share P&L statements, despite poor marketing.
Moda Communities uses Facebook groups to connect buyers and sellers of luxury goods like watches and cars, charging dealers $5-10,000 annually and likely earning $5-10 million in revenue.
The 'whale' phenomenon, where a small percentage of users (e.g., 4% in Candy Crush) drive the vast majority of revenue, is a key driver for businesses targeting enthusiast communities.
The 'gotcha' or mystery box mechanic, originating from Japanese gacha games, has proven highly effective in increasing revenue for collectibles, toys, and mobile games, sometimes by as much as 7x.
Private photo vault apps, despite their niche and potentially sensitive use case, demonstrate significant traction with over a million reviews.
DeFi protocols offer a mechanism for laundering stolen cryptocurrency by allowing hackers to borrow stablecoins against illicit funds, making them difficult to trace and recover.
The enduring power of community-based businesses
The conversation highlights that even in the age of AI, businesses built around community and human connection remain incredibly valuable and profitable. Shaan Puri and Sam Parr discuss how non-technical individuals can still build multi-million dollar enterprises by focusing on these areas. A prime example is NADA (National Automotive Dealer Association), which runs '20 groups'. For an annual fee of $6-8,000, auto dealers are grouped with 20 non-competing peers from different regions. They meet three times a year to share and dissect their Profit & Loss statements, offering each other advice and insights. Despite what the hosts describe as 'horrible marketing' and a dated website, NADA is estimated to generate $13-15 million in annual revenue, showcasing the inherent value in peer-to-peer business intelligence sharing. The hosts suggest this model, which has expanded to include HVAC and marina businesses, could be easily replicated and improved with modern marketing, potentially reaching millions in revenue.
Leveraging niche markets and enthusiast 'whales'
Moda Communities, founded by an individual in Sioux Falls, South Dakota, exemplifies the power of tapping into passionate collector markets. Starting with a Facebook group for watch enthusiasts in 2018, the business has grown to operate over 23 Facebook communities across various collectibles like watches, cars, and gold. These groups cater to specific segments, such as 'watches under $10k' and 'watches over $100k'. To participate as a dealer and list items, individuals undergo a vetting process and pay $5,000 to $10,000 annually. This model, which likely generates $5-10 million in revenue, capitalizes on the 'whale' phenomenon. Whales are a small percentage of users who spend disproportionately large amounts of money within a platform or community, driving the bulk of revenue. This concept is echoed in mobile gaming, where a tiny fraction of players account for 80-90% of earnings.
The 'gotcha' mechanic and its explosive growth
A significant portion of the discussion revolves around the 'gotcha' mechanic, a concept originating from Japanese gacha games, which has been highly successful in monetizing engagement across various industries. This mechanic involves mystery unboxings or 'loot boxes' where users pay for a chance to receive a valuable item. While seemingly counterintuitive, removing choice and introducing an element of gambling or treasure hunting significantly increases spending. This is evident in collectible card games, where apps like 'Triumph' have achieved $100 million per month in revenue by allowing users to buy packs, potentially get a valuable card, or resell the pack for a partial refund, creating a continuous loop of spending. Similarly, in the toy industry, mystery boxes have generated up to 7x more revenue than traditional open-choice retail, despite offering less consumer control. The success of this mechanic lies in psychological triggers: the thrill of the hunt, the reduced perceived loss with buybacks, and the attachment of real-world value to potential winnings, particularly appealing to collectors.
Community models as a durable business moat
The hosts and guests consistently emphasize that communities, networks, and marketplaces are robust 'moats' that are difficult for AI to replicate. While technology itself is no longer a sustainable competitive advantage, the trust, shared identity, and transactional infrastructure built within a strong community remain valuable. Examples like BNI (Business Network International), an acquisition rumored to be over $1 billion, which connects local business owners for lead sharing, and White Coat Investor, a community for doctors focused on personal finance, underscore this point. The potential exists to build a multi-billion dollar company by acquiring and operating various such communities across different professional or interest-based verticals.
The surprising profitability of private photo vaults
An unexpected business discussed is the 'private photo vault' app. These applications serve as secure storage for personal photos, often implying a use case for intimate images. Despite the niche appeal, one such app boasts over a million reviews, indicating substantial user adoption and likely significant revenue. The founder, met at a Hampton event, shared impressive, though undisclosed, figures regarding revenue and employee count, suggesting this seemingly simple utility is a 'behemoth' in terms of profitability. The appeal lies in providing a secure, off-device storage solution for sensitive personal media, fulfilling a specific user need with high perceived value.
DeFi's role in cryptocurrency laundering and recovery challenges
The conversation touches upon the darker side of cryptocurrency, specifically concerning hacks and money laundering. A recent Binance hack, reportedly for $5 billion and attributed to North Korea, highlights the ongoing challenges. Decentralized Finance (DeFi) protocols are identified as a key tool used by hackers. By depositing stolen funds into DeFi platforms, hackers can borrow stablecoins against them, effectively cashing out and making recovery difficult. Even if the collateral is frozen, the borrowed stablecoins are already in the hacker's possession. While tracking is possible, methods like using 'tornado cash' to obscure transactions and moving funds through various DeFi protocols make tracing and reclaiming illicit gains complex, posing a significant hurdle for law enforcement and exchanges.
Mentioned in This Episode
●Products
●Software & Apps
●Companies
●Organizations
●People Referenced
Common Questions
Businesses centered around communities, especially niche professional groups or enthusiast circles, are considered AI-proof. These communities thrive on human connection, shared interests, and peer-to-peer support that AI cannot fully replicate. Examples include NATA 20 groups for auto dealers and Moda Communities for watch collectors.
Topics
Mentioned in this video
Mentioned for his theory that AI will erode traditional business moats, but communities, networks, and marketplaces will remain strong.
Co-founder of Twitter, quoted on the principle of building a billion-dollar business by identifying a universal desire and removing friction.
A social media personality who launched his own 'ripping' business called Rip It, contributing to the fad of mystery box collectibles.
A social network game mentioned for its complex game economy, including nurturing 'whales' and managing in-game currencies.
A popular mobile game where 4% of players generate 80-90% of the revenue, highlighting the concept of 'whales' in gaming economies.
An early prediction market platform in the crypto space that ultimately failed, serving as a historical example before later successes.
An app that functions as a secure storage for photos, often used to hide personal or sensitive images, and has garnered a million reviews.
A cryptocurrency mixing service used to obscure the origin of funds, mentioned as a tool for 'washing' stolen crypto.
A prediction market platform that achieved success years after early attempts like Augur, illustrating the cyclical nature of innovation in DeFi.
A large association for auto dealers, which likely operates the NATA 20 groups.
A past community for e-commerce owners, mentioned as an example of a community-based business.
Business Network International, a referral networking organization that connects local business owners from different professions to share leads. It was recently acquired for over a billion dollars and has 800,000 members.
An organization that runs 23 Facebook communities for buying and selling items like watches, cars, and jewelry. It vets dealers and charges annual fees, generating $5-10 million in revenue.
A successful community, started as a blog, for doctors to discuss personal finance and investment strategies, such as buying rental properties.
A financial institution where the founder of the 'ripping' app discussed previously worked as a quant.
A software company that sponsored the podcast and created a free downloadable database of business ideas discussed on the show.
The largest advertising network for mobile games, providing insights into player acquisition costs and revenue generation strategies.
A dating app whose matching algorithm was discussed as an example of complex optimization, potentially influencing user behavior and engagement.
A live streaming platform discussed in the context of 'whales' and features like 'gifting subs' that encourage spending.
A company co-founded by someone who was the CTO of Apploven, discussed in relation to mobile game advertising networks.
A hedge fund where the founder of the 'ripping' app discussed previously worked as a quant.
The social media platform used by Moda Communities to host its groups. While powerful for reach, its changing rules can pose risks to businesses built on it.
Heating, Ventilation, and Air Conditioning companies whose founders are now being admitted into NATA 20 groups.
A major cryptocurrency exchange that reportedly lost $5 billion in a hack, which they intend to cover using their user security fund.
More from My First Million
View all 86 summaries
81 min$100M hedge fund manager: Do not make the mistake of dying rich
74 minEx-Amazon VP tells us what it’s really like working with Jeff Bezos
54 minwe need to talk about the Elizabeth Holmes doc (unfiltered review)
47 minWe put a multimillionaire’s portfolio into Claude (the results shocked us)
Ask anything from this episode.
Save it, chat with it, and connect it to Claude or ChatGPT. Get cited answers from the actual content — and build your own knowledge base of every podcast and video you care about.
Get Started Free