Hedge Fund Manager Rocks On with Diamond Algorithm

This transcript was generated from the episode audio and may contain minor errors.

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Have algorithm will side hustle. These financial traders apply their career know-how to a completely different industry. They're now earning $5,000 a month in affiliate commissions. Hey, what's up? It's Chris Guillebeau for Side Hustle School.

Gonna tell you today about this hedge fund manager who rocks on with a diamond algorithm. Now, this is somewhat reminiscent of an episode that we did long ago, episode 150. Software engineer turns engagement ring hunt into side hustle. If you're interested in this model, if you like this story, you might wanna go back and listen to that one as well. And before I tell you the story, let me just set it up for you.

Why are diamonds a good thing to be an affiliate for? Now, when you're an affiliate, you're gonna earn a commission for referring a sale to a company, a merchant. Now, diamonds are a good thing to be an affiliate for because they are expensive. They have a high price. There's not a lot of budget diamonds.

If there is a budget diamond, it's still pretty expensive. So the commission you can earn is relatively low percentage wise, it's usually three to 5%, but because diamonds are so expensive, that can still be lucrative. These days, Amazon is just paying something like a 5% commission to referring sales to them. So if you're interested in this industry or this model of affiliate commissions, ask yourself, would you rather earn a 5% commission on an Amazon book purchase or on a diamond? After just a few months, the guys in today's story are referring $100,000 in sales each month, which means that they're earning about $5,000 a month.

And last but not least, before we get into the story, just remember the point of these stories is not to say you should go and do exactly this, right? So if you're not interested in being an affiliate reseller for diamonds, I totally understand that. You might also think though, what else could someone earn commissions like this from? How can I take this example that I'm hearing about now in this form with this model and apply it to something else? A lot of our listeners have done exactly that.

They've listened to one story and they've gone and applied it in their own way to a different industry or a different field. So ask yourself if there could be something like this that you could do, or maybe somebody that you know could do. Every day I say a thank you to our sponsor. I really appreciate them. They allow the show to be free to you.

So let's do that now. Then I'll tell you all about this rock solid money maker. [Music]

Devin Jones, a hedge fund manager from Michigan by day, was a secret algorithm enthusiast by night. You might think there would be other things to be more enthused about, but for Devin, patterns of numbers were the love of his life. Well, besides his now wife, of course.

Luckily he was able to combine two of his favorite things, his two loves, let's say, into one stone cold side hustle. Shopping for the perfect diamond ring to propose to his girlfriend, then fiance, then wife, proved to be a big challenge. Some diamonds were outrageously priced. Some were the wrong cut. Others were just not the one and only for his one and only.

Frustrated, he turned to his daytime business partner to help him out. Two heads are better than one. They put theirs together to download data on diamond inventory from top online jewelers. They were looking for Devin's Goldilocks diamond, something not too big, not too small, and priced just right. Together, they used their trading experience to price each diamond like it was a value stock and figured out how to get the biggest, highest quality diamond within Devin's budget.

They made a model that found a sweet spot between cut, quality, carrots, and price. And according to their algorithm, the diamond Devin eventually selected was underpriced by nearly 30%. After a successful proposal, Devin told his wife about their search and her first response was, "Well, of course you guys would build an algorithm for this." As their other friends got word of his project and asked for help, they realized they were onto something. They began spending all their free time teaching themselves how to code, build a website, and aggregate diamond data from online jewelers. They knew that if they had done it once before, they could do it again to help others find the best cut diamonds and determine which diamonds offered the best bling for their buck.

They built a website called StoneAlco, and once it was ready, they needed traffic. They purchased $250 in Facebook and Google apps. Now, unfortunately, that traffic wasn't very effective. The acquisition cost was too high to be viable in the long term. They then shifted their focus to relying on search engine optimization, SEO, and came up with a strategy that focused more on blog content.

Two months after their official launch in July 2018, their patience paid off. Something shifted and StoneAlco saw a significant increase in referred sales, totaling about $50,000 for that month. Now, remember this is an affiliate model. So when I say they've had $50,000 in referred sales, that means they have referred customers to merchants who have then purchased $50,000 worth of diamonds. They receive a commission on those referred sales of about 5%, so that would be roughly $2,500 in profit.

Consumers don't pay anything to use the StoneAlco site, and the cost of the diamond for them is the same as it would be at the retailer. The affiliate commission is paid by the online jeweler, and those companies consider it part of their marketing budget. Devin has made it StoneAlco's mission to not look too salesy. Instead, he wants to base the model on a concept proven by aggregate sites like kayak.com. And so far, it's paid off.

With just a $12 investment in their domain name, Devin and his partner are now making a monthly profit of over $5,000 based on referred sales of over $100,000 in diamonds. Again, this is a new project. At the time I'm recording it, it is less than six months old. A key differentiator to their growth has been showing product videos of their diamonds so that customers actually know what they're about to spend their money on. A second key factor has been contributing to subreddit communities.

Devin stumbled upon the subreddit diamonds, so that would be just r/diamonds on reddit.com, which was full of people looking for advice on their big diamond purchase. He started regularly posting in response to their questions because they were essentially asking the exact same questions he had asked when he was developing the algorithm for his own personal use. This approach has helped him drive a lot of traffic and referred sales. He's now working on adding new features to the site, like a comparison report that allows users to input any diamonds they want, and then compare them based on their algorithm's interpretation of cut, quality, and value. It's a rock solid side hustle.

Devin and his partner started the project with the small goal of finding the perfect engagement ring. Their goals have now ramped up, and they're determined to not crack under pressure. All right, here are a couple of additional tips that we got from Devin in our notes for the episode. Speaking of his community building approach to Reddit, he said, "We accelerated our growth process "by paying a lot of attention to Reddit." And again, specifically, that is the Reddit subforum, or they call it a subreddit, which is r/diamonds. I'm gonna link that up in the show notes.

And he said, "Finding a community of first movers "who are looking for the type of advice we offer "has helped us quickly get the word out "and also figure out what aspects of the product need work "and what could be added to improve our user experience." One other thing that I thought was interesting is they built their website themselves, and they had never done anything like that before. They didn't have a programming or coding background. They knew about the algorithms, but that's quite different than building a website. And to him, he said, "We really wanted to learn "how to do this ourselves, because if we have a problem, "we wanna be able to fix it ourselves "instead of paying a third party to help out." And something he says really illustrates this well. He said, "The best advice I can give "is to learn to be self-sufficient.

"At the very worst, you learn new skills, "and at best, you understand your business "far better than you would have "without the technical knowledge." So I thought that's interesting because it can often be a good thing to get somebody else to handle some stuff for you, right? There's a lot of power in that. It can save you a lot of time. You'll be more efficient. But self-sufficiency is very much a value of Side Hustle School.

It's very much a value of all the work that I've done for the past decade, even apart from this podcast. So I do love this philosophy of, you know, the worst thing that can happen if you go out to study something is that you learn a new skill, right? And the best thing that can happen is it ends up helping you a ton in your Cytosil or whatever the goal is that you're trying to achieve. So I will leave you with that today. As always, inspiration is good, but inspiration with action is better.

Today's show notes, including links to this project and everything else I mentioned, that Reddit sub forum, et cetera, are at sidehustleschool.com/706. Much more is on the way. Do come back tomorrow and be sure you're subscribed. Once again, my name is Chris Guillebeau. This is Side Hustle School.

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