The secret to 4 letter domains: include one (and only one) digit

...something which has not worked out so well for many economies. I don't want to make it illegal or anything - although I could live with some sort of -use-it-or-lose-it clause that kicks in after a year, and which proved a decent rule of thumb in the real world. Indeed, the term 'squatting' in relation to real estate describes gaining ownership by continuous occupation of property - which is a lot more work than going to the public records office and writings 'dibs!' on the land register.

Domain squatting is just a waste of productive resources, based entirely on the hope of extracting an economic rent from someone else later; and that rent is in proportion to the productive use a site developer (not the squatter) could make of a given domain name. The only investment squatters make in a domain name is usually to stick an ad page on there and track accidental visitors, which may give a useful data point to the buyer; but even then, the buyer is almost certainly not purchasing the domain because of such random traffic. Although registering a domain has a nominal cost, it's not really an investment in any economic sense; indeed, an ad-farm or 'coming soon' page on a domain which receives any significant amount of random traffic is polluted before it becomes branded, albeit very lightly and in a fairly harmless way. The rational economic price for a domain you own which is not making any money is the cost to date of holding the domain plus $1. Any profit beyond that is predicated on the buyer's project being sufficiently advanced and well-capitalized that writing a large check to the squatter is less painful than picking a different name.

The only economic benefit I've ever heard a squatter claim to justify their asking price was that they had made it uneconomical for someone to put porn there. Can you imagine this if domains were actually real estate? 'Yes, I do want a million dollars for this barren patch of desert with a weatherbeaten billboard and a cow skull - you should be grateful there ain't a saloon or a whorehouse here already.'

(And also, via inflating a property bubble, in no small part responsible for current economic difficulties.)

I better go check my registrar account because someone must have broken in and put a useless domain name in there... I hate it when that happens.

First of all, don't assume the domains are unused. You have no way of knowing this. I have domains that are critical to my infrastructure but don't necessarily have a web site (or even public DNS records). I'll never sell them. I have others that are look-alike domains that aren't activated in order to prevent conflict with my other domains. I'm unlikely to sell these, either.

Secondly, and this is really important, make your offer as professional and informative as possible. I never reply to offers from freemail addresses that amount to something like, "Hey, I'm interested in buying a domain that you don't appear to be using for an awesome project I'm working on. Please reply ASAP. George". You don't have to divulge your business model, but at least include the name of the domain you're interested in, your FULL name, a phone number, and preferably a company name and/or related URL. Consider including your offer in the email, since it's more likely to get a response if it's at all worth considering. Serious offers are much more likely to get a reply, even if it's to say, "Sorry, not interested."

If you call and leave a message, include the same information. But keep in mind that I probably won't return a long distance call, so consider saying that you'll call back at a certain time, and do it. This will help to show that you're seriously interested.

Whatever you do, don't file a complaint with the registrar or try to initiate an unauthorized transfer. This will only annoy the domain owner and could destroy your credibility.

Finally, understand that the domain owner has no obligation to respond to your offer in any way. If you really want a response, follow up a couple of weeks later, and be prepared to make a serious offer. If you don't want to be considered a pest, stop after 3 attempts and give it a reasonable long rest before trying again (6 months to a year).

Always specify the domian name and make your outreach email as professional and formal as possible. I never include an actual offer so I can at least get them to reply (if you offer too little, they may not even reply). I never discuss the reason for purchase. The first email is only to determine their interest and start the dialogue.

If they fail to respond in a week (it takes time), I call the phone number listed on the whois record and try the personal touch.

See the reasoning behind the switch from del.icio.us to Delicious.com:

So why did we switch to delicious.com? We’ve seen a zillion different confusions and misspellings of “del.icio.us” over the years (for example, “de.licio.us”, “del.icio.us.com”, and “del.licio.us”), so moving to delicious.com will make it easier for people to find the site and share it with their friends.

http://blog.delicious.com/blog/2008/07/oh-happy-day.html

If you look at the YC list it looks like at least half the YC startups would fail the radio test: https://spreadsheets0.google.com/ccc?key=t_toYuVyy6fci0MAiIa...