Startup ecology
What if markets were studied like ecosystems?
Ecologists are much better at their jobs than economists.
People who study entrepreneurship should be writing about allopatric corporate speciation.1 Or tech ecosystem resource partitioning.2 Or John Bonner’s theories of meta-evolution applied to software.3
These are entry-level concepts in ecology and evolutionary biology. But startup theory has barely moved beyond survival of the (product-market) fittest.
What explains this? My guess is that the people who could study it are all too busy making money. While the best ecologists merely study ecology, the best microeconomists — entrepreneurs — are active apex predators. It would be the equivalent of a sabre-toothed tiger documenting the details of natural selection.
Because of this, evolutionary biologists are better prepared than most to understand why new companies succeed. Here’s where a “startup ecologist” might begin:
Every species has the same loss function — propagating its genes. So, naïvely, you’d expect only one species to be best adapted to survive in any particular location. And yet, in almost every habitat, we see extreme diversity. Tiny slivers of nature often harbor dozens of species of tree, bird, and insect. The natural world is full of specialized organisms which compete across overlapping environments.
Similarly, every company has the same loss function — turning a profit. In each market, you might expect only one company to dominate, the one that’s best at making money in that market. And yet, in almost every sector of the economy, we see extreme diversity. The economy is full of specialized companies which compete across overlapping markets.
In dynamic, adversarial environments, species differentiate themselves by finding niches — local loss minima. It’s the same for companies in market ecosystems.
Or, as Peter Thiel, a rare sabre-toothed entrepreneur who has found time to jot things down, writes:
All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.
For example, how the Great Firewall created a generation of Chinese tech companies.
The idea that companies stop expanding when they start to compete more with themselves than others. Compare The Innovator’s Dilemma.
Software startups create software which makes it easier to create successful software startups. Cloud computing and AI coding are both examples of these “major evolutionary transitions”.