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There are ~30 million businesses in the US. What's this natural winner-take-all dynamic you talk about?

nostrademons 8y ago
This thread isn't about businesses in general, it's about tech businesses. Most of those businesses are in commodity markets like restaurants, hair salons, auto body shops, professional services, and other local businesses. There are geographic barriers to entry for one company taking over the whole market in those industries (not that that necessarily stops them - witness McDonalds and Wal-Mart). There are no such barriers to entry on the Internet. The Internet is new, which means that a number of niches sprung up in the last few years. Most people I know who've capitalized on them make a good living for about 5 years and then find that customers dry up as the industry matures, the next technology platform arrives, and the industry leaders eat up all the rest.
- DVassallo 8y ago
  That's not how I see it. We don't see a winner-takes-all in things like project/productivity/development/collaboration tools, etc. The fact that the barriers of entry are low make it so! There's no reason to believe that small independent tech businesses can't earn their owners a sustainable FAANG-like salary in tech businesses with low capital needs. It's when there's high capital requirements that we actually get a winner-takes-all, such as with building data centers, or doing highly regulated stuff, etc.
  - nostrademons 8y ago
    Just wait. ;-) Low barrier to entry tends to drive down profits until they're just above the opportunity cost of working anywhere else. FAANG salaries are inflated because those companies have monopolies in their industry, so they make massive profits and can push some small portion of that down to employees to ensure they get their pick of applicants. Economically, the returns to small SaaS businesses without barriers to entry should eventually trend toward the median for programmers in general once sufficient time has passed that they no longer hold a monopoly in their industry.

This thread isn't about businesses in general, it's about tech businesses. Most of those businesses are in commodity markets like restaurants, hair salons, auto body shops, professional services, and other local businesses. There are geographic barriers to entry for one company taking over the whole market in those industries (not that that necessarily stops them - witness McDonalds and Wal-Mart). There are no such barriers to entry on the Internet. The Internet is new, which means that a number of niches sprung up in the last few years. Most people I know who've capitalized on them make a good living for about 5 years and then find that customers dry up as the industry matures, the next technology platform arrives, and the industry leaders eat up all the rest.

DVassallo 8y ago
That's not how I see it. We don't see a winner-takes-all in things like project/productivity/development/collaboration tools, etc. The fact that the barriers of entry are low make it so! There's no reason to believe that small independent tech businesses can't earn their owners a sustainable FAANG-like salary in tech businesses with low capital needs. It's when there's high capital requirements that we actually get a winner-takes-all, such as with building data centers, or doing highly regulated stuff, etc.
- nostrademons 8y ago
  Just wait. ;-) Low barrier to entry tends to drive down profits until they're just above the opportunity cost of working anywhere else. FAANG salaries are inflated because those companies have monopolies in their industry, so they make massive profits and can push some small portion of that down to employees to ensure they get their pick of applicants. Economically, the returns to small SaaS businesses without barriers to entry should eventually trend toward the median for programmers in general once sufficient time has passed that they no longer hold a monopoly in their industry.