Categorized | Domaining Tips

The Handheld Fan Effect in Domaining

Posted on 03 April 2019 by Andrei

As I was reading one of Michio Kaku’s futurology books (for some strange reason, I’ve been thinking more and more about the relationship between astrophysics and economics over the past months), I couldn’t help but have a bit of an “aha!” moment with respect to domaining when he chose to make a point using the “handheld fan” metaphor.

You know how you’re sometimes hot and feel better by using one of those handheld fans? Well, scientifically speaking, due to the muscle use in such situations and all that, there’s actually a NET GAIN when it comes to heat. But because you feel cooler in the area you’re targeting, there’s a nice psychological effect there that makes you feel better despite… you know, despite you actually doing the exact opposite of what you should be doing.

Time and time again, I notice something similar in the domaining world.

For example, let’s say Joe spends $9,000 hand-registering 1,000 domains based on just some random data mining… usually not the best idea in 2019 and beyond. So, anyway, he buys all of them today, April 3 2019 and has zero sales for several months. However, let’s say on the 10th of October, he manages to close one deal at $2,000 and is feeling awesome… after all, he just turned $9 into $2,000, right?

Well, no, not really.

The problem with this equation is that he’s still $7,000 in the red and on the 3rd of April 2020, so in about half a year, he has to pony up another $9,000 for renewals. In other words, if he has no other sales and wants to keep all his domains, he will be $16,000 in the red by spring.

Unfortunately, it sometimes gets worse.

Blinded by the handheld fan effect, the proverbial Joe frequently chooses to double down on his strategy and invests another $9,000 this way. That $2,000 sale made him feel good about a bad strategy, so he ends up doing more of the exact opposite he should be doing.

Then 6 more months pass, zero sales.

Toward the end of March, he will be $7,000 + $9,000 in the red (since he bought another 1,000 domains).

At the beginning of April, he will be $7,000 + $9,000 + $9,000 in the red (renewal season for his first 1,000 domains).

Later in 2020, he will be $7,000 + $9,000 + $9,000 + $9,000 in the red (renewal season for his second batch of 1,000 domains)… a grand total of $34,000 down the drain.

In the absence of the fan effect, he could have just maybe cut his losses by not renewing any domains. $7,000 down the drain… but what can you do, just consider it a learning experience and move on. But through a deadly combination between a statistical fluke (the $2,000 sale) and the over-confidence it brought about, a $7,000 loss can turn into a $34,000 one and then some just like that.

Of course, all of this seems silly to you.

And it might even seem silly to Joe in hindsight.

But when you’re in the middle of it all, these things creep up on you and lead to mistakes that could have been avoided but haven’t been. Emotional responses may be great in other areas of life, but they’re career-ending when it comes to business or investing.

Food for thought…

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