Social Arbitrage: The New New Path to Abnormal Returns | Hacker News Reader

Social Arbitrage: The New New Path to Abnormal Returns

alexkrupp.typepad.com

17 pointsAlex391712 comments

I don't believe that there is no market for "tools" anymore, nor that any new successful web page needs to be social.

To support my comment: what about iTunes? It seems to fall in the "tools" category by the articles standards, yet it is fairly new and successful. Sorry to go on about this, but that article somehow irks me: if you have a good idea, go for it, if not, don't. Will somebody really think "I have this great idea, but wait, it is not a social network, so it can't possibly work"? I hope not...

iTunes is more about dealmaking and vendor lock-in than it is about technology or tools. I mean, it's just a file-downloading and hard-disk-access tool, plus a DRM system, plus a nice UI. People were downloading files and accessing hard disks and writing UI's in 1970; maybe they didn't have DRM, but that's hardly an advance. No, the reason iTunes is popular is because a) the iPod is popular, and the iPod only works (well) with iTunes; and b) Apple has made big deals with big record companies to put tons of songs on iTunes. iTunes is not a technological step up; it's just a parlaying of Apple's muscle and hardware marketshare.

So, even before iTunes existed, you'd probably have difficulty starting a startup which was supposed to do what iTunes does now, since without the iPod and Apple's negotiating power, you're left with a file downloading utility with DRM and no songs from major records, and nobody wants that. So iTunes not only isn't a tool, it isn't a startup-applicable idea; nobody would shy away from doing iTunes because it's a non-social-network application, because they wouldn't try to do iTunes to begin with.

Edit: Anyway, I think it's reasonable to think that a lot of the obvious straight-web-tools genres are well-done enough already that you'd have difficulty starting a startup in one. There might be whole new markets for straight tools out there for the taking, but they're at the very least harder to think of than they were in 1995. A lot of the equivalently easy-to-think-of social applications are just now getting off the ground, so the whole essay kind of makes sense.

The most interesting thing about the article to me is that it seems to imply a theory of waves of market gaps closing, and that maybe each market gap gets created by the closing of the one before it. There was a market gap for PCs, then that got (more or less) filled, which created a market gap for connectivity, the filling of which created a market gap for web tools, and now that closing has created a market gap for social tools. It could be totally bunk, but it's fun to think about anyway.

I tend to think about it like the Cambriam Explosion: it seems to me that at times a new technology comes along that is so much better than anything before it that for a while it's adaptors have a kind of free ride, untill a winner evolves. My personal favourite example are computer games: it seems most kinds of games were already being written as soon as home computers were available. Eventually a few genres emerged that crushed all the other ones. "Doom" was another such leap that triggered an armada of First-Person-Shooters.

So now for a while everything "social" will survive for a while, untill the big players have manifested themselves.

Anyway, I didn't want to make a point for iTunes, just "prove" that social networks are not the only kind of applications successful today.

Ofoto (now Kodak Gallery), Shutterfly and Webshots are not dead. There are different reasons people share photos, just as there are different reasons people share text. That we even call such sites "photo sharing" shows how primitive our understanding is. Imagine if we called news.yc "just another text sharing site".

"All the good tools are taken" is the statement I disagree with most in this article.

Technologically, news.yc is just another text sharing site. It's only the people and the way they interact that separate it from Reddit, Digg, Fark, etc. So if you want to make a new "text sharing website" and have it be successful, you better have something better than the technology to differentiate yourself from your competition.

If the community you want to attract can do things more the way they want with your technology, you've solved an important part of the problem. For example, reddit's "Recommended" section is an attempt at that.

I totally agree with you that it's idiotic to say that all the tools have been created. I think that all the obvious tools have been created and the challenge is now to find the new ones that we've always wanted but weren't previously able to build.

I-and I suspect everyone else reading YC News-can probably think of dozens of tools that I'd love to see (and if you're a reader you've probably thought about this too and are thinking of starting a company to build this tool).

I agree too. :-)

When I said: "Today, all the good tools already been taken."

I meant for obvious to be included as part of good. Of course there are literally more tools to be made, but there are probably easier ways to create value than finding the one perfect tool that no one's thought of yet.

Idiot.

People, we need a succinct term for non-technical people who think they have a lot to contribute to startups. You can't call them suits or MBAs because most of them didn't go to B-school and don't wear suits. Any thoughts?

Great post, thanks.

Agreed. Hence, a new key to sustainable competitive advantage is creating media that:

1) increases awareness of the community

2) showcases participants in the community

3) generates profits

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