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Comment by jacques_chester | Hacker News Reader

What you're seeing here is leverage. Basing your business on Facebook gives you very high potential market exposure vs a total dependence on Facebook.

It's analogical to buying shares with borrowed money. You've increased the potential upside, but now the downside is that much more catastrophic.

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Exactly. And given what excessive leverage did to the world's financial markets not so very long ago, I think relying on that kind of leverage again in this market is crazy.

This is a really bad argument. You're implying that the leverage discussed here (coupling your product with Facebook) is the same as the leverage that caused the financial crisis. The only thing they have in common is you can use the word "leverage" to describe either of them.

The two leverages have another thing in common - risk.

Yes and no. If the companies in question are privately held then to a certain extent the risk is only with investors brave (or foolish) enough to back them. However, what do you think would happen to the tech industry, and potentially the wider world economy, if a big name company suddenly went up in smoke, public or otherwise?

Now, please pause for a moment and consider: it doesn't have to be Microsoft or Apple or Oracle. Some of the crazy valuations are putting much less robust companies within an order of magnitude. If one of them goes, it's going to be big news and stock prices right across hi-tech industry could race to the bottom scarily fast as we've seen before.

If you are, for example, Zynga, then the kind of disaster that could lead to catastrophic failure seems awfully difficult for you to anticipate or control. Likewise all kinds of new companies being built on Twitter and so on, keeping in mind that Twitter (as far as I know) doesn't actually make any money itself yet and could easily be displaced by the next new shiny thing tomorrow.

I'm not saying it's going to happen at all, never mind tomorrow, but there is definitely a house of cards building up here, and of such things, market bubbles are made.

So if my business relied on airfreight I am leveraged by the airlines, the airport owners, the aircraft makers, the pilots unions, the oil companies ....

So logically anyone who wants to ship a physical product should start by developing their own oil well and aluminium ore mine.

Just imagine that all of the above were owned by the same company/government, without any real competition.

The better analogy would be: if you business depends on Delta Airlines you should have a good chat with other Airlines to expand your business. It' s a common pattern in the non-virtual world that dependency on one exclusive channel/customer (Ask textile producers in Pakistan about IKEA) is prone to fail.

And indeed, if your business depends on airfreight you will also be strongly coupled to the destiny of that part of the industry. There's no need to develop your own oil well, but to have a vision about alternatives is a good thing in that case. Branson's Virgin sells records. And airtravel. And Mobiles. Would he have survived by betting exclusively on Sony MiniDisc ?

Well, for what it's worth, airlines do engage in quite a bit of commodity price collaring in order to ensure that fuel price fluctuations don't totally destroy their business model. This is in some respects de-leveraging at least as far as this conversation is concerned :)

See Zynga.

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