“I could have built that in 2 weeks!”

Yes but did you? That’s the point. You’ll often hear an over zealous programmer or engineer exclaim that they could have built [insert hot startup] in no time so what was the fuss about?

The key that they’re missing out on is that it’s simple to clone, but extremely difficult to innovate.

It’s a decision tree. Every node represents a set of decisions available to you with all the possible permutations as below.

decision tree

What is visible to everyone is the path travelled, not the paths forgone. Once you know your destination, tracing the tree back to the root is relatively simple. However, starting from the root without knowledge of your destination is where true innovation happens. That is a process filled with trial, error, failure, and course-correction over and over again till you reach your final destination.

Conceptually speaking there are several startups that are in the same space – most fail but some do better than others, with one becoming a market leader. Path, Instagram, Oink, etc are all relatively similar, but you’ve heard of some and not the others. Why? They’ve all taken different paths in the tree which has enabled some greater success than the others.

First mover advantage is real. Reaching first on the scene with a product that scales gives you a distinct advantage to becoming the market leader no matter who you’re competing against. Take the case for Facebook, a company with near infinite resources and the top destination for the web. They were late to the ephemeral photo space behind Snapchat. Facebook released a Snapchat clone called Slingshot in an attempt to beat them. Despite Facebook’s resources behind Slingshot, which one do you have on your phone? They also released a Flipboard clone with Facebook News (yes they had/have a separate news app), an Instagram clone with Facebook Camera (before acquiring the former), and a Foursquare clone with Facebook places (now defunct) amongst others. They failed in every one of those cases for the exact same reason that they succeeded in out-competing Google+: they were there first.

Switching costs in networks ensure that network effects are always in play. If a user is on a hot app with his friends, he’s not going to switch to a clone that does the same thing and also convince his friends to switch, even if the second one is slightly better. The only way to convince the user to overcome the switching cost is to offer something that is 10x or an  order of magnitude better than what he is using.

Success always looks easy from a distance. That’s because it’s only the path travelled that is visible, not the entirety of the tree. The next time someone says “I could have built that in 2 weeks” simply ask “then why didn’t you get there first?”.




For the US to remain competitive, it needs to outsource *more* jobs to China & India

Globalization has made the world a smaller place. A consequence has been the shift of jobs, especially in manufacturing, to China and India. Contrary to popular belief, the fall of US manufacturing is to the benefit of the US by making the industry more competitive than before.

Lets take a bottoms-up approach. With respect to American manufacturing, the way it works is:

I am a US corporation. My costs are ridiculously high and profits are very low.
I discover I can reduce my costs by 40-70% if I move manufacturing to China. So, I do that (lets hold the fact that I need to layoff a bunch of people in US for now and come back to that).
As a company, that increases my profits which enables me to re-invest it and grow. Being a US corporation, US government sees more cash by taxing my higher profits, which it can use to build society, healthcare, infrastructure etc. and do other public good.

If all American companies do this, then US industry in general grows, becoming more competitive – creating more jobs everywhere – both in the US and China. To support growth, I will need more skilled employees in the US and more unskilled employees in China because that’s what their strengths are at. It is basically trading on comparative advantage making everyone better off. This helps everyone by creating more jobs overall. I would argue this means that more jobs get created by more financially stable companies than before, compensating for the original layoffs multi-fold.

So, as the US Govt., I would not focus on manufacturing, since that needs more unskilled labor and China can do it much cheaper comparatively. So, I may as well send all my manufacturing there and focus my resources on maintaining and building the skilled labor advantage – whether that means increasing access to education, lowering costs to education, attracting the world’s smartest people to work in America or encouraging entrepreneurship in general. This way, I can export my services and innovation that comes out of that. So, I can import my kid’s toy train from China, but export new drugs or even, say Microsoft Office out (stuff that can only be built using US’s core advantage of skilled labor). On the other hand, since US is and will continue to be a hub for skilled labor, most of the world’s innovative and profitable companies (like Apple) will be of US origin.

However,a caveat is in the manufacturing of complex machines. Complex machines require more skilled labor for quality and if people are willing to pay more for a better quality product, then that is a clear market opportunity. So, that is a case for the resurgence of US manufacturing, where skilled labor is needed for quality goods. But, unskilled labor nonetheless should be exported out.

It is really hard to be great at everything. The human race was able to reach today by specialization in fields and then trading. The same argument here. US specializes in skilled labor and leave the unskilled part to someone else.

The reality behind “We got 70k users in 2 days of launch”

For any startup, gaining traction depends on two things: 1) How many people are you bringing and 2) How many users getting engaged. The first one has a lot to do with marketing, while the second one has everything to do with the product.

How many people are you bringing?
Companies launch not over one day, but over a process that can last almost an entire month or maybe more. Phrases like “We got 70k users in 2 days of launch” often have a back-story behind them.

1) Instagram – For instagram, they had Jack Dorsey (founder of Twitter and about 2m followers) back them. So, when they launched, it was fairly easy for them to get their initial users since they needed to get people like Dorsey reach out to their network and the press picked it up pretty quickly.

2) LinkedIn – I was speaking to one of the co-founders of LinkedIn, who was VP of Marketing. He said that initially most of their users were PR based because in the early days, the product was not too viral. LinkedIn took its time to grow compared to other social networks.

3) SkyFire (funding: $41m to date) – Speaking to one of the founders, they launched when the iPhone had just launched and so were a very press friendly story. They also had closed their Series A which enabled them to invest aggressively in PR. So, a lot of their users were PR driven and then word of mouth referrals.

This is pretty interesting since mostly when you hear stories like “we had 70,000 users in 2 days of launch” – a lot of that is paid for or has significant help. It is very rarely viral just from the product.

The effectiveness of PR campaigns is often questioned since a lot of it depends on content, relevance and visibility. However, besides PR, there are other avenues like SEM, SEO, Social etc. which you can tap into for your initial influx of users.

How many people are getting engaged?
A key point is that after the initial influx of users is established, it is up to you to create a wonderful user experience with your product – create something that is useful and usable to have them stay and give referrals. Instagram grew virally after its initial influx because its users simply loved the product. Similarly, users gained significant value from having a LinkedIn profile, which enabled the network to grow further.

For this reason, before you invest in marketing, you need to keep gathering data, testing and failing in front of a smaller network, probably your own Facebook network till you figure out your product actually works. The product almost will never go viral if you only invite all your Facebook friends, though you will get some very solid data from them using it. Doing this will ensure that when you finally pay for the initial influx of users to come and “launch to the world”, you are better prepared.

Good Luck!