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The problem with this way of thinking is that existing markets are probably efficient enough - meaning all easy ways to make a lot of money have already been ex

The problem with this way of thinking is that existing markets are probably efficient enough - meaning all easy ways to make a lot of money have already been exhausted. This means that any idea that you generate by encountering a problem and thinking of a solution is probably either too hard to implement or will generate relatively puny revenue stream (nothing to sneeze at, but probably not of much interest to VCs and founders chasing big bucks). What's the alternative? To wait for tectonic shifts in overall environment and circumstances, look for vacant ecological niches and pounce when you see one. To the outside view this will look exactly like a founder who doesn't know what to start up. Here is an example I like: John Carmack. The conventional view is that he is a brilliant game programmer (which is undoubtedly true). But the alternative point of view is that his shtick was to capitalize on the period of incredible advances in consumer hardware. Each of his games fully showcased what the best hardware of that time was capable of (order of magnitude more than the previous generation) which made them instant hits. Not coincidentally, he quit making games around the time this period of advancement stopped. Here is a post by @defmacro making a similar point: http://www.defmacro.org/2015/02/25/startup-ideas.html http://www.defmacro.org/2015/02/25/startup-ideas.html

austincheney 6y ago
John Carmack's success is due to id Software incubated at Softdisk. The reality of that success, at least in the beginning, was an already established stream of revenue, a ready assembled team, and proper leadership. The brilliance and innovation of Carmack came later. They had day jobs, revenue, and product/market fit already established before spinning out of Softdisk to launch id. That isn't enough to account for the super stellar success they would later enjoy, but it fully explains launching a successful business. There isn't any magic or secret sauce there. > The problem with this way of thinking is that existing markets are probably efficient enough Oh, that's certainly not true. The challenge there is the expertise to see the current dysfunction versus the risk of solving for it. Solving for the dysfunction often comes at competition for the limited resources required for current practice of art and rejection from just about everybody. Knowing this there is a choice to be made: 1. Sustain the current practice with current income and no change in risk 2. Proceed with the solution knowing that failure is probable and that a startup begins with a financial valley of death (burns cash without the revenue to make up for it) while knowing the greatness of the idea is financially irrelevant. I say the greatness of the idea is financially irrelevant, because disruption requires some degree of originality and originality scares the shit out of people. That means the idea will burn money churning in frequent rejection until it achieves some manner of market assistance.
- dunkelheit 6y ago
  > John Carmack's success is due to id Software incubated at Softdisk. The reality of that success, at least in the beginning, was an already established stream of revenue, a ready assembled team, and proper leadership. The brilliance and innovation of Carmack came later. They had day jobs, revenue, and product/market fit already established before spinning out of Softdisk to launch id. That isn't enough to account for the super stellar success they would later enjoy, but it fully explains launching a successful business. There isn't any magic or secret sauce there. The point is that they could have all this, but without them capitalizing on the incredible wave of rising hardware performance we wouldn't be talking about them now. Big opportunities arise when the situation is dynamic. > > The problem with this way of thinking is that existing markets are probably efficient enough > Oh, that's certainly not true. The challenge there is the expertise to see the current dysfunction versus the risk of solving for it. Notice that I didn't state that there is no dysfunction, only that there are no easy opportunities to exploit it. The reality is that the world is full of dysfunctions but they persist not because people are lazy to fix them, but because our systems are stuck in the bad equilibria which are hard to get out of. Take healthcare for example. To anyone who went to a doctor even once the dysfunction is obvious. The system can probably be made 10x more efficient with fairly simple tweaks! But good luck implementing them - you will be stuck in the molasses created by regulation, incumbents and simple inertia of people unwilling to experiment with their health.

austincheney 6y ago

John Carmack's success is due to id Software incubated at Softdisk. The reality of that success, at least in the beginning, was an already established stream of revenue, a ready assembled team, and proper leadership. The brilliance and innovation of Carmack came later. They had day jobs, revenue, and product/market fit already established before spinning out of Softdisk to launch id. That isn't enough to account for the super stellar success they would later enjoy, but it fully explains launching a successful business. There isn't any magic or secret sauce there. > The problem with this way of thinking is that existing markets are probably efficient enough Oh, that's certainly not true. The challenge there is the expertise to see the current dysfunction versus the risk of solving for it. Solving for the dysfunction often comes at competition for the limited resources required for current practice of art and rejection from just about everybody. Knowing this there is a choice to be made: 1. Sustain the current practice with current income and no change in risk 2. Proceed with the solution knowing that failure is probable and that a startup begins with a financial valley of death (burns cash without the revenue to make up for it) while knowing the greatness of the idea is financially irrelevant. I say the greatness of the idea is financially irrelevant, because disruption requires some degree of originality and originality scares the shit out of people. That means the idea will burn money churning in frequent rejection until it achieves some manner of market assistance.

dunkelheit 6y ago
> John Carmack's success is due to id Software incubated at Softdisk. The reality of that success, at least in the beginning, was an already established stream of revenue, a ready assembled team, and proper leadership. The brilliance and innovation of Carmack came later. They had day jobs, revenue, and product/market fit already established before spinning out of Softdisk to launch id. That isn't enough to account for the super stellar success they would later enjoy, but it fully explains launching a successful business. There isn't any magic or secret sauce there. The point is that they could have all this, but without them capitalizing on the incredible wave of rising hardware performance we wouldn't be talking about them now. Big opportunities arise when the situation is dynamic. > > The problem with this way of thinking is that existing markets are probably efficient enough > Oh, that's certainly not true. The challenge there is the expertise to see the current dysfunction versus the risk of solving for it. Notice that I didn't state that there is no dysfunction, only that there are no easy opportunities to exploit it. The reality is that the world is full of dysfunctions but they persist not because people are lazy to fix them, but because our systems are stuck in the bad equilibria which are hard to get out of. Take healthcare for example. To anyone who went to a doctor even once the dysfunction is obvious. The system can probably be made 10x more efficient with fairly simple tweaks! But good luck implementing them - you will be stuck in the molasses created by regulation, incumbents and simple inertia of people unwilling to experiment with their health.