
Monetizing Business Ideas - makeramen
http://dilbert.com/blog/entry/monetizing_business_ideas/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2FihdT+%28The+Dilbert+Blog%29&utm_content=Google+Reader
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dpatru
What Adams is describing is a staging area for business formation. The general
insight is that there is a large class of transactions that need a staging
area in which the components needed for the transaction have a chance to come
together.

Online dating sites, bars, clubs, etc are staging areas for dating. They bring
together interested people and hold them in proximity until dates happen.
Dates in turn are staging areas for marriage.

Stores, markets, auctions, and stock markets are staging areas for purchases.
They bring together buyers and sellers and hold them together in proximity
until purchases happen.

International talks, conferences and political summits are staging areas for
treaties and political agreements. They bring together political decision
makers and hold them together long enough for agreements to happen.

Writing and broadcasting are staging areas for learning. Both writing and
broadcasting connect a speaker with a listener long enough for information to
be transferred.

Democratic governments and corporations (with chains of authority) are staging
areas for coordinated group action. A democratic government allows citizens to
work together to accomplish big tasks like building a national highway system,
putting a man on the moon, and waging a war. Corporations do the same for
private profit-making activities.

Banks are staging areas for loans. Banks allow borrowers and lenders to get
together.

Ports are staging areas for trade. Ports allow buyers and sellers of goods and
transportation to meet each other.

The Internet is a great tool for making or improving staging areas because it
makes communication easier.

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edanm
Firstly, I think YC addresses some of the problems he mentions (i.e., that
most people might not be able to get VC money, but have valid ideas that could
be made into semi-successes).

But the big problem is this: ideas aren't worthless because they require
execution. Ideas are worthless because, _before_ the execution, the idea
itself is just not good. It takes executing on the idea and constantly
pivoting to get to a "good idea", because when you first think of a direction,
you barely understand the problem, and definitely don't understand how you're
going to solve that problem.

In other words, the problem isn't a lack of access to resources - it's that
your initial idea sucks, and only if you keep refining it do you get to
anything usable.

~~~
bali
Just read this: <http://paulgraham.com/start.html>

Graham argues if ideas would be worth a lot, there would be a market for them.
If you understand how the market works, especially in the US, even more so in
the Valley, you would agree, I certainly do...

Or if you don't like Graham's argument think of any established venture's
story: it has never, ever been a straight line from the idea to success.
Business models change along the way: it's the people that count, their
attitude and execution

Would you have thought that coke is a good idea in the late 19th century? A
black, sticky drink? Or mobile phones in the 70s? Or messages with 140
characters in the era of emails?

~~~
davidw
> If you understand how the market works,

If you know a bit about economics, you would see why there are not, and cannot
be markets for ideas, unless someone finds a very clever way of making them
'excludable' without hordes of lawyers and contracts and various other very
high transaction costs. See my other post above/below.

~~~
bali
The problem with ideas is not that they are non-excludable or that transaction
costs are too high (contractual costs, monitoring, you can cite the whole
institutional economic literature from Coase to Williamson). It is not so hard
to construct excludability, think of non-excludable goods such as fish,
"ideas" for fiction, "ideas" for scientific research. They need to be linked
to something, fish: best fishermen, fiction: best novelists like Stephen King
get contracts without writing down a single word, research: a professor gets
tenure. They just need to be linked to something excludable, e.g. to the
person itself, or the service of a venture. (And I am still not talking about
regulation, patents, etc!)

There is no market for venture ideas without the founders who are credible in
executing them. Not because they are non-excludable, but because in fact they
don't exist for a long time: it is very rare that somebody has an initial idea
that won't change during building a company. Markets, customers, technology
change.

If the world of startups would work like you say they do, it would be enough
for the most creative persons to get a long term contract from VCs just to
tell the ideas that pop out of their minds every morning.. Have you ever seen
that happen? VCs invest in people who execute and are able to adapt ideas as
circumstances change.

Btw, I am an economist so I happen to understand economics (to a certain
degree :)

~~~
davidw
I wouldn't argue that ideas are worth a _lot_ , my point is that if the value
of ideas is lower than that of various clunky mechanisms that attempt to make
them excludable, that there will be no market.

That does not mean, though, that the ideas do not have _any_ value, only that
the vast majority if it lies in the execution rather than the idea itself.

For practical purposes, it doesn't change much, but the idea of "there's no
market for it, so it's worthless" bugs me and I think it is not good
economics. There are other things that we value that aren't directly bought
and sold on 'natural' markets, or where markets must be artificially created
via things like "intellectual property" or "cap and trade", government
provisioning or other mechanisms like that, or where we simply accept that
there's no viable way to make a market.

The classic example from economics (added for the benefit of other readers,
you're surely familiar with it) is the lighthouse (which is also non-
rivalrous): they're valuable to shipping, but generally, governments have
provided them, because there was no way to make individual ships pay directly
for their usage. They are not "worthless because there was no market for
them".

~~~
bali
I see where you are coming from and what bugs you in the logic of Graham.

None of us denies that there are transaction costs related to operate an "idea
market", we just seem to argue about their amount/importance/relevance. I say
these costs are not the primary reason behind the absence of the market but
rather the fact that there are no stable ideas that can be used to found a
sustainable business upon. You say there are stable ideas but it would be too
costly to operate or even establish a market mechanism. (Although I am sure
there would be a charity organization or even the government that would
establish the market if it would be mostly a one-time fixed cost and low
running expenses such as in the lighthouse example).

I should go to sleep now, have to wake up in 2 hours.. (but I really enjoyed
the conversation, thx :)

(btw, a question - do you really think there is anything that is valuable to
people but nobody has ever tried to monetize it if it wasn't banned by
authority? Air, love, aesthetics of a building or a landscape, even values and
religions... I have seen business models related to all of these)

(btw2, it may be worthwhile to define what we mean under "1 idea" :)

~~~
davidw
> there are no stable ideas that can be used to found a sustainable business

I didn't mention 'stable'!

What I think is that there are ideas that, at the right point in time, allow
people who can execute on them well to do really well. And I think some of
those ideas, at least, can be done well by a reasonable number of people. For
instance, something like eBay was likely to pop up at that point in time. So
for a little while, prior to its inception, it would have been a valuable
idea.

However... no, I don't think a market for ideas can be stable due to the non-
exclusivity of ideas! Once one is out there, its value drops quite a bit. It's
similar to markets for some kinds of information, like knowing the closing
price of the DJIA on the 3rd of November. If I knew that today, it'd be worth
a lot of money. Next week, it'll be worth nothing.

~~~
bali
I think we are stuck here, should probably discuss while having a beer :)

~~~
davidw
More than willing to next time you're in Padova!

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symkat
So we need someone with capitol, someone with attorney and tax skills, and
someone with web-design skills and someone with backend and systems arch
skills to build Scott's idea. Oh, and servers. Let's start refining the
details and come to an agreement everyone is happy with.

~~~
forensic
And then you get to be one of those clever pieces of software that says, "Most
of software x was created by software x!"

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netcan
I think Adams has a thread of an interesting idea. But, I think his starting
point for it (monetizing business ideas) might be the wrong one. As he says,
the ideas would be stolen. As edanm notes in another comment, the basic idea
is worthless until it is refined.

However, the concept he arrives at: a web based way for people to contribute
and retract resources to a project until you get a combination everyone is
happy contributing to is an interesting one. It probably won't work, I have
objections coming to mind immediately, but it would be interesting to find
out. If it did work it might be very useful.

I wonder what a MVP or "qanta of usefulness" from this idea would look like.

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davidw
The economic concept at the heart of "worthless ideas" is that they are non-
excludable goods, for most practical purposes:

<http://journal.dedasys.com/2007/04/26/ideas-are-worthless>

Which Scott Adams does acknowledge in this piece.

I think that non-excludability, combined with the fact that execution _is_
more important than the idea, will keep markets for ideas from forming.

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bali
Always agreed with the first sentence of the post: "Ideas are worthless.
Execution is everything."

I advise 50% of people telling me about a new iPhone app idea to go and open a
restaurant at the corner. You make 4-800K a year, with 10-30% margin: that's
way more than what most ideas are worth - given solid execution.

However if I would have hired all these people mentioned in the article:
"Management, Marketing, Sales, Legal, Accounting, Technical, Human Resources"
...instead of doing 90% of these by the 2 founders we would be already
bankrupt, lol. Focus and execute, use everyday opportunities to gain momentum,
be more thoughtful of resources, etc. There hasn't been one day in the past 6
months when I couldn't improve something, find a workaround, etc (by myself,
without HR or a lawyer). Just in the past 1 hour I manage to spare $1500 by
using someone else's network and resources almost for free.

Think of Netflix & the US Post; Google & Yahoo; Microsoft & IBM; Intel & IBM;
Yahoo & Netscape; Facebook & Harvard. What is the common element in their
stories? :)

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ludlow
What if partially executed ideas have value?

Idea = zero value

Idea + Execution = much more than zero value

If there is value in partial execution:

Idea + Partial Execution = more than zero value

Then Scott Adam's suggestion that idea creators who use his hypothetical
service to start to assemble the resources required to execute (i.e. partially
execute) should receive a minimal return makes some sense (he suggests 1%
which may be too high). This can be true even if the eventual idea is many
pivots from the original because the pivots are points on the same continuum
of execution.

~~~
techbio
An idea in and of itself is free from technical debt.

<http://en.wikipedia.org/wiki/Technical_debt>

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btilly
Given that most startups have to pivot, the people doing an idea should pay
approximately 0% to the author of the original (and soon to be discarded)
idea.

