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NONE: Re: ONLINE-ADS>> "Web Reflections"

Re: ONLINE-ADS>> "Web Reflections"

Bob Wyman (bobwyman_at_healthgate.com)
Fri, 25 Oct 1996 06:51:12 -0400

Tony Glassman <all_at_once.roc.servtech.com> wrote:
> Trouble is, when the great revelations come [on the Internet],
> everybody will have them or at least 'they'll be swarmmed over
> like a puck in kid's hockey.' (TM)....and, of course, what
> everyone has depreciates its value to next to nothing.
> I'm very ready to hear why this isn't true, if it's not.

Welcome to the Internet -- a "more perfect" market. "More perfect"
that is, in the classic economic sense of being a market in which
there is a free and rapid flow of information. In a market like this,
the value of innovation tends to be reduced drastically, when viewed
from the perspective of the individual innovator. The rapid flow of
information and lack of effective patent or intellectual property
protection results in competitors discovering and adopting useful
innovations very rapidly and without restraint. On the other hand,
from the perspective of the market as a whole, the value of
innovation is increased. Useful innovations are more rapidly
disseminated and adopted -- resulting in improvements in overall
market productivity or the creation of new markets.

In a market like this, speed and quality of execution in exploiting
an innovation are vastly more rewarding than being an inventor. A
"smart" businessman wouldn't sit around scratching his head trying to
figure out what will be the next killer application. Rather, he would
pile up some money in a bank, get an option on office space, and then
simply watch newsgroups, mailing lists, etc. until someone else
identifies the opportunity. Then, he'd jump in and fly like the wind,
trying to be early to market and establish a position.

The problem is, of course, that those who are best at innovating have
historically not been those who have the resources to rapidly and
effectively exploit their innovations. It is most likely, for
instance, that if you come up with something really good -- with a
broad market -- that Microsoft or Netscape will put a few hundred
engineers on the problem and give away or bundle a better version of
your product for free... This is a market that Ayn Rand would hate.
The innovators are constantly seeing their innovations "stolen."
Others grow rich while the innovators apologize to credit card
companies about last month's payment and explain to their wives "Yes,
it was my idea, but..."

In this kind of market, the key is not innovation in its own right.
To succeed, you must either focus on exploiting the innovations of
others, or, you must be very careful about the kind of innovation
that you create. If you insist on innovating, you would be best
served by looking for something which is both cheap to implement
rapidly as well as having its value enhanced by limited
implementation. To be successful in a "more perfect" market -- in the
absence of effective intellectual property right protections, you
must seek innovations whose value is enhanced by monopoly -- i.e. the
creation of an imperfect market. That is hard to do.

bob wyman


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