Starting vs. Building a Company | Hacker News Reader

Starting vs. Building a Company

daslee.me

35 pointsrelation11 comments

Durable companies are one thing.

There's also the art form of catching some wave and building a company designed to be flipped in a few years' time. After that, the company (now division) in question invariably crashes and burns and the founders blame the whole fiasco on the acquirer. Happens...

I think the key dichotomy here is between creating a successful product at the core of a company and creating a successful system that is able to repeatedly generate, select, and distribute products that fill market needs. Disney, 3M, and Apple are all great examples of "blockbuster factories" that are able to repeatedly innovate into the next field of play.

great point. better said than my articulation of continuing to innovate through tech cycles.

Thanks! Great piece, by the way — my goal is to be a successful starter and builder. And I agree that many seem to focus only on the former.

To be perfectly honest, there are a few companies that exist because the build and sell something fairly remarkable as a product or a service, but there are literally millions of companies that survive off of the inefficiencies in existing markets. Many/most businesses operate off of a form of arbitrage, not unique product creation.

For example, look at retail, it exists on the arbitrage opportunity of buying things in bulk and transporting them to local markets to sell them. However, if transportation costs were cheaper or people did a better job of planning ahead, most retail need not exist.

Even online retail has the same problem, at a certain level Amazon woudln't need to exist if manufacturers could sell and deliver direct to you.

My point is that most businesses don't need to exist, but there is opportunity in both short and long term arbitrage that isn't durable or sustainable, but many times can be quite profitable.

What you call "arbitrage", many call distribution. And it can get pretty complicated.

Take the simplistic example of a local grocery store. In no particular order, the store must:

- Determine what to carry

- Determine how much to buy, taking into account seasonal variances, local tastes and preferences (is there a sporting game in town? Buy more beer)

- Arrange for financing to cover everything; a good-sized grocery store has millions of dollars of inventory sitting on the shelves

- Ensure the hot things stay hot, and the cold things cold

- Loss prevention: reduce theft, breakage, spillage, spoilage as much as possible

- Handle vast amounts of cash, exposing the store to all manner of theft (by employees), counterfeiting, fraud, and robbery

All I'm saying is, don't dismiss something because it isn't "unique product creation".

Sure, I didn't mean to imply that those aren't real businesses. I just meant to imply that in the "startup world", a lot of these businesses are totally overlooked because they aren't doing the minimum viable product lean startup thing.

I don't dismiss those businesses at all, I think there are a lot of great opportunities in arbitrage based businesses, but a lot of startups ignore the opportunities that aren't the next big mobile/social thing.

Retailers are not surviving off inefficiencies in the market. They're "distribution as a service" (DaaS) that handle the complex logistics so that the manufactures don't have to.

Part of why Walmart is putting so many smaller retailers out of business is because they're experts at optimizing a huge part of the vertical stack of retail, distribution, and logistics operations.

Your example seems a little off. Manufacturers can and do sell directly to individuals. The huge benefit of Amazon and Safeway is that it's one place I can go to get most of the things that I need. Why would I want to buy salt from Morton's separately from ketchup from Heinz?

> My point is that most businesses don't need to exist, but there is opportunity in both short and long term arbitrage that isn't durable or sustainable, but many times can be quite profitable.

I'm not sure your point here follows. Arbitrage is supposed to express a need, isn't it? (IANAEconomist)

No, arbitrage is mechanical or intermediate step in the elimination of a pricing discrepancy between two markets or market participants. It is usually implied as one that is taking no net or residual risk in the underlying asset. It need not exist, per-se, as with dispersed time and information (and threshold efficiency) the market participants would adjust their bid/ask prices in its absence (eventually).

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