Technology laws about markets

Gilder's Law

Computing power, storage capacity, bandwidth, network effects. Everything technology can offer is being used to get to July 18 faster. This is sometimes referred to as Gilder's Law, after the American futurologist George Gilder. This states that the best business models mainly use/waste a lot of cheap resources and save the more expensive, less available resources. When steam became cheaper than horses, smart companies switched to steam at the expense of the horses. Now computing power, storage capacity and bandwidth are cheaper than people. Google has approximately 1 million servers in its data centers and employs just over 70,000 employees. This enables Google to process 3.5 billion searches per day at an estimated cost of 0.25 cents and revenue of 25 cents per search. Could consultants perhaps use their expensive people better and let computers do the stupid work, for example?

The 'Winner Takes All' principle

Whoever gets to July 18 first or brings that date forward wins. Big. This is called the "Winner Takes All" principle. Mass is cash. For example, if storage capacity exceeds Moore's First Law, then July 18 is brought forward in a business model in which storage is an important component. Examples of the Winner Takes All: Google beat Yahoo, Excite, and Alta Vista. Bing is a distant second. In fact, there are no real competitors left for Amazon, Wikipedia, Twitter, Google Maps, PayPal, Skype and many others. Perhaps that is why the Chinese government set up a wallet and did not allow Google, Facebook and Amazon or made it difficult for them in favor of their own Baidu, Ren Ren and Alibaba, respectively? All examples of Winner Takes All.

The principle of the 'First Mover Advantage'

The Winner Takes All is different from the term 'First Mover Advantage'. It's not so much about being the first to start, but about being the first to have a salable product on the shelf. Several studies have shown that the success rate for First Movers is approximately 50 percent. The 'Fail First' principle is sometimes referred to with some cynicism. And yet there are clearly proven benefits for the first mover in a market segment. Amazon and eBay are examples of successful first movers. When the first American book chains started their online adventure, Amazon had already passed July 18. EBay was the first when it started online auctions in 1995. Both could count on extensive brand awareness due to their first move. Marketing gurus Al Ries and Jack Trout call it "The Law of the First". Who was the first to fly solo across the Atlantic Ocean? Of course, Charles Lindbergh. Who was number two? Nobody has an idea. (It was a certain Bert Hinkler who later achieved fame when he was the first to fly solo from England to Australia). Number three, then? Amelia Ehrhardt. We do know them again. Ah, she was the first woman to fly solo across the Atlantic. In short, first moving leads to brand awareness. Another advantage of moving first is economies of scale. The first mover has a longer learning curve (starting earlier and therefore being able to learn more) and is therefore probably earlier at July 18. In addition, there are switching costs for the customer to switch from the first mover to a later mover. The first mover will always try to develop the business model in such a way that switching costs are as high as possible. In addition, a first mover can enter into strategic relationships with suppliers so that strategic resources are insufficiently available or not available at all for later movers. First movers have first choice when choosing a brand name and website, and when hiring specialists.

Hoffman's Law

As soon as a market opportunity becomes visible, the aim is to accelerate as quickly as possible. LinkedIn founder Reid Hoffman said, "If you're not ashamed of your first version, you waited too long to introduce it." After all, customers give much more feedback than you could have imagined. Hence Hoffman's Law: “Iterate Fast and Release Often”. Start with a minimally viable product with few functionalities and let the customers further shape the product. That means investing in market research, marketing and other promotion. If you are enough versions further before July 18, you are better prepared to scale up. Because: "Don't scale it until you nail it!".

Clark's Law

Jim Clark is an American entrepreneur who has three times built a startup to a value of more than $1 billion (including Netscape and WebMD). He is also known (just like Bill Joy van de Wet van Joy) for his purchases from the Dutch yacht builder Wolter Huisman and for his Law of Clark: “If you cycle too slowly you will fall over”. In other words: if you do not start fast enough and invest too little, you will not reach the desired starting speed. According to Clark, you can't do a market launch half-heartedly. He was therefore a genius at raising money from investors.

Hotelling's law versus Anderson's long tail

Harald Hotelling was an American statistician and he came up with the following law in 1929, roughly translated: “Companies choose the middle of the market so as not to miss a customer”. The long tail idea from 2006 by the American author and entrepreneur Chris Anderson is diametrically opposed to this: differentiate to the max. In the physical world, shops mainly want the well-selling products on the shelf, the hits. There are not that many hits. That's why everyone offers pretty much the same thing. Online, the 'stock warehouse' is infinitely large and small niches, far away, can also be served well. The idea behind this: the greater the supply, the greater the demand will be. A CD store may have 10,000 titles, of which a hundred may be real hits; iTunes or Spotify have millions of titles available. The first group is going bankrupt; the second group blooms.

Gross's Law

If you move as one of the first (First Mover), if you learn quickly enough from your first versions (Hoffman) and if you invest sufficiently in the introduction (Clark) and if you differentiate yourself sufficiently from the competition (Hotelling/Anderson), then you are perhaps on the way to Gross' Law , named after pay-per-click entrepreneur Bill Gross: “If your product is ten times better than what the competition offers, then that competition has basically lost it”. A common adage in Tech: don't go for 10 percent better, but for 10 times better. In an experiment at the University of Michigan, students re-searched Google search queries themselves, but this time in the books and journals of the university library. That took an average of 22 minutes per question. Looking up the same questions via Google took an average of seven minutes before arriving at the right answer. That saves 15 minutes per question. With an average Dutch hourly wage of €14, this saves 15/60*€14 = €3.50 in time savings per search. Google's revenue model (see also Gilder's Law) consists of costs of €0.0025 and advertising revenue of €0.25 per search query. That is a factor of 100 on top of the costs (..). In addition, a customer value of €3.50: an 'infinite' factor in relation to the costs for the user (because it is free), a factor of 14 in relation to advertising revenue and a factor of 1,400 in relation to costs. Gross's Law on steroids, that is.

Clarke's Third Law

Arthur C. Clarke was a British science fiction author ('A Space Odyssey') and creator of three laws. The first law is about science: “When a well-known, older scientist declares that something is possible, he is almost certainly right. If he says something is impossible, he is most likely wrong.” The second law is about discovery: “The only way to discover the limits of the possible is to venture a little into the impossible”. Clarke's Third Law is what this is all about and is an abstraction of Gross' Law: "Any sufficiently advanced technology is indistinguishable from magic."

Bell's Law

Gordon Bell is an American inventor and entrepreneur who launched Bell's Law in 1972: “About every decade, a lower-cost class of computers based on a new form of software, network, and interface develops, resulting in new uses that in turn create a new industry. form in itself”. Within the Tech sector, think of the development from mainframe to minicomputer to personal computer to laptop to smartphone and now to the Internet of Things (your refrigerator, doorbell and boiler are also connected to the Internet).


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