7 ms·

Monetizing Business Ideas

53 points by makeramen 16y ago

symkat 16y ago
So we need someone with capitol, someone with attorney and tax skills, and someone with web-design skills and someone with backend and systems arch skills to build Scott's idea. Oh, and servers. Let's start refining the details and come to an agreement everyone is happy with.
- forensic 16y ago
  And then you get to be one of those clever pieces of software that says, "Most of software x was created by software x!"
davidw 16y ago
The economic concept at the heart of "worthless ideas" is that they are non-excludable goods, for most practical purposes: http://journal.dedasys.com/2007/04/26/ideas-are-worthless http://journal.dedasys.com/2007/04/26/ideas-are-worthless Which Scott Adams does acknowledge in this piece. I think that non-excludability, combined with the fact that execution is more important than the idea, will keep markets for ideas from forming.
deleted 16y ago
[deleted]
btilly 16y ago
Given that most startups have to pivot, the people doing an idea should pay approximately 0% to the author of the original (and soon to be discarded) idea.
edanm 16y ago
Firstly, I think YC addresses some of the problems he mentions (i.e., that most people might not be able to get VC money, but have valid ideas that could be made into semi-successes). But the big problem is this: ideas aren't worthless because they require execution. Ideas are worthless because, before the execution, the idea itself is just not good. It takes executing on the idea and constantly pivoting to get to a "good idea", because when you first think of a direction, you barely understand the problem, and definitely don't understand how you're going to solve that problem. In other words, the problem isn't a lack of access to resources - it's that your initial idea sucks, and only if you keep refining it do you get to anything usable.
- bali 16y ago
  Just read this: http://paulgraham.com/start.html http://paulgraham.com/start.html Graham argues if ideas would be worth a lot, there would be a market for them. If you understand how the market works, especially in the US, even more so in the Valley, you would agree, I certainly do... Or if you don't like Graham's argument think of any established venture's story: it has never, ever been a straight line from the idea to success. Business models change along the way: it's the people that count, their attitude and execution Would you have thought that coke is a good idea in the late 19th century? A black, sticky drink? Or mobile phones in the 70s? Or messages with 140 characters in the era of emails?
  - davidw 16y ago
    > If you understand how the market works, If you know a bit about economics, you would see why there are not, and cannot be markets for ideas, unless someone finds a very clever way of making them 'excludable' without hordes of lawyers and contracts and various other very high transaction costs. See my other post above/below.
    - bali 16y ago
      The problem with ideas is not that they are non-excludable or that transaction costs are too high (contractual costs, monitoring, you can cite the whole institutional economic literature from Coase to Williamson). It is not so hard to construct excludability, think of non-excludable goods such as fish, "ideas" for fiction, "ideas" for scientific research. They need to be linked to something, fish: best fishermen, fiction: best novelists like Stephen King get contracts without writing down a single word, research: a professor gets tenure. They just need to be linked to something excludable, e.g. to the person itself, or the service of a venture. (And I am still not talking about regulation, patents, etc!) There is no market for venture ideas without the founders who are credible in executing them. Not because they are non-excludable, but because in fact they don't exist for a long time: it is very rare that somebody has an initial idea that won't change during building a company. Markets, customers, technology change. If the world of startups would work like you say they do, it would be enough for the most creative persons to get a long term contract from VCs just to tell the ideas that pop out of their minds every morning.. Have you ever seen that happen? VCs invest in people who execute and are able to adapt ideas as circumstances change. Btw, I am an economist so I happen to understand economics (to a certain degree :)
bali 16y ago
Always agreed with the first sentence of the post: "Ideas are worthless. Execution is everything." I advise 50% of people telling me about a new iPhone app idea to go and open a restaurant at the corner. You make 4-800K a year, with 10-30% margin: that's way more than what most ideas are worth - given solid execution. However if I would have hired all these people mentioned in the article: "Management, Marketing, Sales, Legal, Accounting, Technical, Human Resources" ...instead of doing 90% of these by the 2 founders we would be already bankrupt, lol. Focus and execute, use everyday opportunities to gain momentum, be more thoughtful of resources, etc. There hasn't been one day in the past 6 months when I couldn't improve something, find a workaround, etc (by myself, without HR or a lawyer). Just in the past 1 hour I manage to spare $1500 by using someone else's network and resources almost for free. Think of Netflix & the US Post; Google & Yahoo; Microsoft & IBM; Intel & IBM; Yahoo & Netscape; Facebook & Harvard. What is the common element in their stories? :)
dpatru 16y ago
What Adams is describing is a staging area for business formation. The general insight is that there is a large class of transactions that need a staging area in which the components needed for the transaction have a chance to come together. Online dating sites, bars, clubs, etc are staging areas for dating. They bring together interested people and hold them in proximity until dates happen. Dates in turn are staging areas for marriage. Stores, markets, auctions, and stock markets are staging areas for purchases. They bring together buyers and sellers and hold them together in proximity until purchases happen. International talks, conferences and political summits are staging areas for treaties and political agreements. They bring together political decision makers and hold them together long enough for agreements to happen. Writing and broadcasting are staging areas for learning. Both writing and broadcasting connect a speaker with a listener long enough for information to be transferred. Democratic governments and corporations (with chains of authority) are staging areas for coordinated group action. A democratic government allows citizens to work together to accomplish big tasks like building a national highway system, putting a man on the moon, and waging a war. Corporations do the same for private profit-making activities. Banks are staging areas for loans. Banks allow borrowers and lenders to get together. Ports are staging areas for trade. Ports allow buyers and sellers of goods and transportation to meet each other. The Internet is a great tool for making or improving staging areas because it makes communication easier.
ludlow 16y ago
What if partially executed ideas have value? Idea = zero value Idea + Execution = much more than zero value If there is value in partial execution: Idea + Partial Execution = more than zero value Then Scott Adam's suggestion that idea creators who use his hypothetical service to start to assemble the resources required to execute (i.e. partially execute) should receive a minimal return makes some sense (he suggests 1% which may be too high). This can be true even if the eventual idea is many pivots from the original because the pivots are points on the same continuum of execution.
- techbio 16y ago
  An idea in and of itself is free from technical debt. http://en.wikipedia.org/wiki/Technical_debt http://en.wikipedia.org/wiki/Technical_debt
netcan 16y ago
I think Adams has a thread of an interesting idea. But, I think his starting point for it (monetizing business ideas) might be the wrong one. As he says, the ideas would be stolen. As edanm notes in another comment, the basic idea is worthless until it is refined. However, the concept he arrives at: a web based way for people to contribute and retract resources to a project until you get a combination everyone is happy contributing to is an interesting one. It probably won't work, I have objections coming to mind immediately, but it would be interesting to find out. If it did work it might be very useful. I wonder what a MVP or "qanta of usefulness" from this idea would look like.
deleted 16y ago
[deleted]

53 points by makeramen 16y ago

So we need someone with capitol, someone with attorney and tax skills, and someone with web-design skills and someone with backend and systems arch skills to build Scott's idea. Oh, and servers. Let's start refining the details and come to an agreement everyone is happy with.

forensic 16y ago
And then you get to be one of those clever pieces of software that says, "Most of software x was created by software x!"

davidw 16y ago

The economic concept at the heart of "worthless ideas" is that they are non-excludable goods, for most practical purposes: http://journal.dedasys.com/2007/04/26/ideas-are-worthless http://journal.dedasys.com/2007/04/26/ideas-are-worthless Which Scott Adams does acknowledge in this piece. I think that non-excludability, combined with the fact that execution is more important than the idea, will keep markets for ideas from forming.

deleted 16y ago

[deleted]

btilly 16y ago

Given that most startups have to pivot, the people doing an idea should pay approximately 0% to the author of the original (and soon to be discarded) idea.

edanm 16y ago

Firstly, I think YC addresses some of the problems he mentions (i.e., that most people might not be able to get VC money, but have valid ideas that could be made into semi-successes). But the big problem is this: ideas aren't worthless because they require execution. Ideas are worthless because, before the execution, the idea itself is just not good. It takes executing on the idea and constantly pivoting to get to a "good idea", because when you first think of a direction, you barely understand the problem, and definitely don't understand how you're going to solve that problem. In other words, the problem isn't a lack of access to resources - it's that your initial idea sucks, and only if you keep refining it do you get to anything usable.

bali 16y ago
Just read this: http://paulgraham.com/start.html http://paulgraham.com/start.html Graham argues if ideas would be worth a lot, there would be a market for them. If you understand how the market works, especially in the US, even more so in the Valley, you would agree, I certainly do... Or if you don't like Graham's argument think of any established venture's story: it has never, ever been a straight line from the idea to success. Business models change along the way: it's the people that count, their attitude and execution Would you have thought that coke is a good idea in the late 19th century? A black, sticky drink? Or mobile phones in the 70s? Or messages with 140 characters in the era of emails?
- davidw 16y ago
  > If you understand how the market works, If you know a bit about economics, you would see why there are not, and cannot be markets for ideas, unless someone finds a very clever way of making them 'excludable' without hordes of lawyers and contracts and various other very high transaction costs. See my other post above/below.
  - bali 16y ago
    The problem with ideas is not that they are non-excludable or that transaction costs are too high (contractual costs, monitoring, you can cite the whole institutional economic literature from Coase to Williamson). It is not so hard to construct excludability, think of non-excludable goods such as fish, "ideas" for fiction, "ideas" for scientific research. They need to be linked to something, fish: best fishermen, fiction: best novelists like Stephen King get contracts without writing down a single word, research: a professor gets tenure. They just need to be linked to something excludable, e.g. to the person itself, or the service of a venture. (And I am still not talking about regulation, patents, etc!) There is no market for venture ideas without the founders who are credible in executing them. Not because they are non-excludable, but because in fact they don't exist for a long time: it is very rare that somebody has an initial idea that won't change during building a company. Markets, customers, technology change. If the world of startups would work like you say they do, it would be enough for the most creative persons to get a long term contract from VCs just to tell the ideas that pop out of their minds every morning.. Have you ever seen that happen? VCs invest in people who execute and are able to adapt ideas as circumstances change. Btw, I am an economist so I happen to understand economics (to a certain degree :)

bali 16y ago

Always agreed with the first sentence of the post: "Ideas are worthless. Execution is everything." I advise 50% of people telling me about a new iPhone app idea to go and open a restaurant at the corner. You make 4-800K a year, with 10-30% margin: that's way more than what most ideas are worth - given solid execution. However if I would have hired all these people mentioned in the article: "Management, Marketing, Sales, Legal, Accounting, Technical, Human Resources" ...instead of doing 90% of these by the 2 founders we would be already bankrupt, lol. Focus and execute, use everyday opportunities to gain momentum, be more thoughtful of resources, etc. There hasn't been one day in the past 6 months when I couldn't improve something, find a workaround, etc (by myself, without HR or a lawyer). Just in the past 1 hour I manage to spare $1500 by using someone else's network and resources almost for free. Think of Netflix & the US Post; Google & Yahoo; Microsoft & IBM; Intel & IBM; Yahoo & Netscape; Facebook & Harvard. What is the common element in their stories? :)

dpatru 16y ago

What Adams is describing is a staging area for business formation. The general insight is that there is a large class of transactions that need a staging area in which the components needed for the transaction have a chance to come together. Online dating sites, bars, clubs, etc are staging areas for dating. They bring together interested people and hold them in proximity until dates happen. Dates in turn are staging areas for marriage. Stores, markets, auctions, and stock markets are staging areas for purchases. They bring together buyers and sellers and hold them together in proximity until purchases happen. International talks, conferences and political summits are staging areas for treaties and political agreements. They bring together political decision makers and hold them together long enough for agreements to happen. Writing and broadcasting are staging areas for learning. Both writing and broadcasting connect a speaker with a listener long enough for information to be transferred. Democratic governments and corporations (with chains of authority) are staging areas for coordinated group action. A democratic government allows citizens to work together to accomplish big tasks like building a national highway system, putting a man on the moon, and waging a war. Corporations do the same for private profit-making activities. Banks are staging areas for loans. Banks allow borrowers and lenders to get together. Ports are staging areas for trade. Ports allow buyers and sellers of goods and transportation to meet each other. The Internet is a great tool for making or improving staging areas because it makes communication easier.

ludlow 16y ago

What if partially executed ideas have value? Idea = zero value Idea + Execution = much more than zero value If there is value in partial execution: Idea + Partial Execution = more than zero value Then Scott Adam's suggestion that idea creators who use his hypothetical service to start to assemble the resources required to execute (i.e. partially execute) should receive a minimal return makes some sense (he suggests 1% which may be too high). This can be true even if the eventual idea is many pivots from the original because the pivots are points on the same continuum of execution.

techbio 16y ago
An idea in and of itself is free from technical debt. http://en.wikipedia.org/wiki/Technical_debt http://en.wikipedia.org/wiki/Technical_debt

netcan 16y ago

I think Adams has a thread of an interesting idea. But, I think his starting point for it (monetizing business ideas) might be the wrong one. As he says, the ideas would be stolen. As edanm notes in another comment, the basic idea is worthless until it is refined. However, the concept he arrives at: a web based way for people to contribute and retract resources to a project until you get a combination everyone is happy contributing to is an interesting one. It probably won't work, I have objections coming to mind immediately, but it would be interesting to find out. If it did work it might be very useful. I wonder what a MVP or "qanta of usefulness" from this idea would look like.

deleted 16y ago

[deleted]