A recent Financial Times article about Facebook’s stunning growth struck a chord with me:
… I am concerned that he [Zuckerberg] sets an example of meteoric success that virtually no one else will ever be able to repeat. But wannabes are trying to copy him, and consequently squandering their careers on false hopes.
For pure-software/Internet/mobile ideas, the low barriers to entry have created a very crowded, “weedy” ecosystem. It’s a great time to be a consumer (e.g. look at the number of mobile apps and free Web sites), but a very tough time for entrepreneurs in these segments. More and more projects look like lottery tickets: long odds, with a slim chance of payoff.
Why do entrepreneurs do it? It’s partially the psychology of poverty, where entrepreneurs hungry for success (financial or otherwise) make irrational decisions. Worse, a startup career commitment, unlike a lottery ticket, has an especially high opportunity cost. The other element is a belief that skill can influence the outcome. This is generally true, but is much less so in these segments: competition is fierce, copying is rampant, and success often comes from quirky combinations of factors that are difficult to plan.
We will have more big Facebook-scale lottery outcomes, and that will spurn more entrepreneurial career bets. But I think the smartest entrepreneurs will avoid the lottery.