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Why do youth the variance in returns had increased? Because of the first point? I don’t think I buy the first point, though. Intellectual property rights are p

by md_ 7y ago

Why do youth the variance in returns had increased? Because of the first point? I don’t think I buy the first point, though. Intellectual property rights are probably at an all time high. Is the point that many types of innovation are outside of copyright able/patentable innovation, that enforcement is imbalanced, or something else? (What about the prototypical awe of the 800lb established competitor who simply buys the startup?)

Nevermark 7y ago
It is tough for any small group to protect itself from a motivated, well funded, and well informed competitor even using copyright, trade marks and patents. Part of the reason is that it can take vast sums and years to enforce IP rights against deep pockets. The other reason, is that no matter how much IP you formally protect, most of any business is not its IP, it is the sales and support channels and services, etc. Even a lean software startup’s code is likely mostly the non-IP code that delivers and supports the IP actually solving a problem. This means well funded and well informed competitors have a good chance of solving the same problem using a slightly different solution. You saved them work by defining the problem, providing an example solution, and validating the market for solutions to that problem. Probably the best way for a small team to protect any really valuable IP is if they keep it a Trade Secret, while growing the business until it has the depth of resources, customer engagement, market bisinility and organizational depth so that deep pocket copycats might be successful too, but without stopping your momentum. Obviously, this strategy depends on being able to deliver new IP to market without disclosing it exists. But customers care more about the results you can give them than how you do it. So innovative code buried in an app may not attract much or any scrutiny. Aiming initially at underserved or previously unserved markets also avoids attracting competitive attention. Edit: I think variance in returns has gone up because information tech is making it easier and easier for new organizations to serve larger markets, so more small companies will make it big. And at the same time, competitors are more likely to notice anything significant, and their are many more competitors observing and reacting globally. And we now have massive global competitors like Google, Facebook and Amazon that are getting harder to avoid as they attempt and often succeed in dominating one market after adjacent market. So expected (in the statistical sense, I.e. mean) returns have gone up, but the ease that a startup can be crushed is also higher. There is a kind of conservation of risk and reward in economics, so it isn’t unexpected that bigger opportunity attracts players who in turn create bigger risks for new players.

by md_ 7y ago

Nevermark 7y ago

It is tough for any small group to protect itself from a motivated, well funded, and well informed competitor even using copyright, trade marks and patents. Part of the reason is that it can take vast sums and years to enforce IP rights against deep pockets. The other reason, is that no matter how much IP you formally protect, most of any business is not its IP, it is the sales and support channels and services, etc. Even a lean software startup’s code is likely mostly the non-IP code that delivers and supports the IP actually solving a problem. This means well funded and well informed competitors have a good chance of solving the same problem using a slightly different solution. You saved them work by defining the problem, providing an example solution, and validating the market for solutions to that problem. Probably the best way for a small team to protect any really valuable IP is if they keep it a Trade Secret, while growing the business until it has the depth of resources, customer engagement, market bisinility and organizational depth so that deep pocket copycats might be successful too, but without stopping your momentum. Obviously, this strategy depends on being able to deliver new IP to market without disclosing it exists. But customers care more about the results you can give them than how you do it. So innovative code buried in an app may not attract much or any scrutiny. Aiming initially at underserved or previously unserved markets also avoids attracting competitive attention. Edit: I think variance in returns has gone up because information tech is making it easier and easier for new organizations to serve larger markets, so more small companies will make it big. And at the same time, competitors are more likely to notice anything significant, and their are many more competitors observing and reacting globally. And we now have massive global competitors like Google, Facebook and Amazon that are getting harder to avoid as they attempt and often succeed in dominating one market after adjacent market. So expected (in the statistical sense, I.e. mean) returns have gone up, but the ease that a startup can be crushed is also higher. There is a kind of conservation of risk and reward in economics, so it isn’t unexpected that bigger opportunity attracts players who in turn create bigger risks for new players.