Save Me From B-School

First-mover advantage (FMA, not to be confused with FML) is one of those things they teach you in business school as *doctrine*. Be first, or don’t bother. This leads to much malaise when, upon coming up with, say, a brilliant idea for a mobile coupon business, hopes and dreams are shattered when it becomes known that hordes of other entrepreneurs are working on the same idea.

I have been thinking about how FMA applies to web startups, and after some thought, I now believe first-mover advantage is a myth in the web world.

If the premise of FMA relies on the fact that a first-mover will gain resources and advantages that  later entrants will not be able to match, then these advantages have to be compelling enough to warrant fighting to be first. And I’m not sure they are any more.

Argument below. Thoughts/criticism welcome.  Put this together pretty quickly (and highly unscientifically) so I’m sure there are lots of holes.

1.  Moore’s Law and speed.

Moore’s law is one of those “golden rules” in the tech world. Everybody looooves to cite it. Moore’s law is to tech nerds what Foucault is to philosophy junkies.

It’s because there’s a lot of brilliance in Moore’s law.  As I understand it - the real brilliance here was the observation that technology progresses much quicker than people would think possible (or more accurately, that the number of transistors on a chip doubles every 24 months).

If you think about how this plays out in the consumer world, it means that consumers will become socialized to adopting more advanced technology faster.  So the amount of time it takes for a market to develop, hit a peak, and become saturated (say, photo sharing) is shrinking.

How does this affect first-mover advantage?  Take a look at my lovely graph below. If a technology markets develop more quickly, this will seriously reduce the potential upside for a first-mover. The top graph is what we think is FMA, the bottom is what I believe it really looks like.

If this is true, the potential upside you can gain from FMA is shrinking.

2.  Underestimated importance of initial users (adoption) and marketing.

I know a lot of entrepreneurs who have the “if you build it they will come” mentality. No one will admit to this, obviously.  They talk to you all day about marketing and user acquisition, but it seems like very very few web startups actually do this well.

I know I’m not alone here - Dave McClure wrote an excellent rant on this about a month ago.

Initial users are the ones that will evangelize your service and make it zeitgeisty and remarkable. I saw this great video last night on the importance of “first followers” and how they help to create mass movements.

Sharp marketing and committed users have nothing to do with FMA and seemingly everything to do with popularity and adoption.

3.  Zero barriers to entry, commodification of apps, low switching costs.

Have you noticed all of those “hey look at what I built in a weekend” links on Hacker News? The ease-of-use afforded by these new slick web frameworks like Rails and Django make it pretty easy and quick to build a site and enter a market.

Web sites and mobile apps are undergoing a process of commodification as they become easier and easier to make, and the move toward cloud-based apps makes the switching costs for the user nearly zero. It’s no longer enough to have a single hit with a single great app.

All of these trends are really cutting into the upside of being first.

4.  “Early is the same as wrong”. This is something I heard a lot in Silicon Valley. I don’t necessarily agree - if you are early but are smart enough about your cash to hold on until the market matures, then you’re not necessarily wrong. Seems like the emphasis on being first is flawed - it’s about timing.

The tough part is finding the trade-off. There’s this sweet spot between the first-mover land-grab and market readiness, but you have to hold on until the wave hits.  Everyone’s favorite example here is online video - there were plenty of video sites pre-YouTube but they were slow and mostly annoying. The strategic use of flash and rise in broadband internet in homes helped to make the market timing nearly perfect, though with the dominance window narrowing I think even trying to time the market is an exercise in futility.

Market Dominance in the Brave New Web World

So, if not from FMA, where does real market dominance come from?

I suppose in a way I’m making an argument for extreme iteration. But it’s more than that. I think the consumer web industry - similar to fashion and music - is incredibly driven by trends and timing.  If you can hit a curve at the point right before widespread adoption, and do this consistently, you will become more invaluable to your user.

See the graph below - the point here is that it’s no longer a single curve and a single market. Instead, the companies that will do the best, in my mind, are the ones that can take advantage of many markets consecutively.

The company that I believe does this best is Facebook. If they had stayed a profile -n- poke site, they’d surely be dead by now. Instead, each product launch happens right around the top end of a curve - photos, videos, Twitter-style-messages, and now talk of geo-enabled features and even “check-ins”.

While FMA as a concept is not dead to me completely - it can be incredibly helpful in many many other markets, to me in the app-driven world of the web (and increasingly mobile too) it just doesn’t seem all that important.

Conclusion: “someone’s already doing this” should be a crappy deterrent.

If you really love something, you should want to know everything about it, right?

I am currently in an ongoing love affair with the internets. This, mixed with the liberal dispensing of tech-related kool-aid that goes on at MIT, has provided enough of an impetus for me to begin learning how to actually write beautiful code. The hack-job e-commerce sites I had developed and run and SEO-ed like mad before school just will not do. No, this is a completely different undertaking.

And guess what? Writing respectable code is REALLY EFFING HARD.

Genius conclusion, I know. I wanted to write this post though, not to announce to the world that hey-guess-what-coding-is-hard, but rather to analyze why I believe business-y people like myself tend to abandon ship at this point in the learning process.

I do not plan to quit. In fact, I am only *more* determined and believe that over the next 2 years I can learn enough Python to be dangerous. That said, long-term-progress undertakings are really easy to quit.

The reason I’m not quitting is because I’ve been through this before, when I decided in 2005 that I just had to learn Chinese. So I did what any normal/sane person would do and packed my bags and moved to Beijing. I was not leaving until I could speak Chinese. Period.

I wanted to learn Chinese because my ultimate plan was to get a PhD in Chinese-American relations and become a badass diplomat (translation: spy). I really believe that in order to understand something at the most intimate level you need to learn the entire chain - ie, in order for me to understand the inner workings of the Chinese government, I had to be able to understand how the interactions take place in their most basic form.  Same thing with computers and the internet. In order to truly understand macro trends, it seems like one needs to be familiar with the most granular aspects of the trade.

I enrolled in a beginner (level 0) Chinese class here and off I went. What I did not realize is that any Chinese class worth a damn will spend at least the first month going over the fundamentals of the language. This means you don’t even learn how to say a single sentence until at least one month in - and keep in mind this is full-time studying. See the video below. Welcome to my entire life, September 2005.  I’ll call this the “bopomofo” period. Day after day it was “bo po mo fo”, again! repeat! You learn sounds and tones and initials and finals and radicals and you leave each day not one bit more prepared to go and order lunch than you were the day before.

I was frustrated, and wanted to quit. Why was I wasting my time learning how to shape my mouth and twist my tounge just right and listen for the difference between first tone and fourth tone? Hello! I had dumplings to order, and fake-North-face vendors to haggle with!

With Chinese, you can’t just take what you know from English or Spanish or German or whatever and apply it. You have to start from scratch and completely re-conceptualize how you think about language and structures and communication fundamentally.

After three months, it started to make sense. If I wanted to actually become good and not just some dummy with a phrase book, I had to have a strong grasp of the fundamentals. I couldn’t go straight to learning phrases otherwise I would have to eventually unlearn all of my bad habits. So I sucked it up and went back and really really mastered all those mouth formations. And then I skipped two levels of class and ended my year having an all-in-Chinese throw-down with a military doctor in Tibet. Good times. (Though sadly now I’ve forgotten a good chunk of what I learned).

Seems to be the same in the world of developers. There are probably more than a few who have some knowledge here and there but don’t really have a clue how the entire system works together. These are the people with the phrase books who can say enough to sound impressive but in reality have a really shallow knowledge-base.

I am in the “bopomofo” period of learning to program, which is fine with me only because I know it’s going to be these micro-incremental teeny tiny baby steps for a while. But man, it sucks.

Now I understand why so many business students and other non-technical types who love technology make the attempt to learn how to code and then quit right around now. In non-technical professions there really is no equivalent to this particular type of learning. Spending an entire day to get the “name” field to work on a form for your website is easy to dismiss as a “non-optimal” use of time, especially when there’s someone you can hire who can do it in 5 minutes.

Though I think that is completely missing the point.

Knowing the “bopomofo” of the web world can be extremely helpful for non-technical people when interacting with a technical team. And once you make it through mastering the fundamentals, your ability to learn new concepts improves exponentially.

At least that’s what I’m hoping.