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The myth of the first mover

The Economist, reconstructing an argument from Stan Liebowitz's Re-Thinking the Network Economy, debunks the once-vaunted notion of first-mover advantage. ("Having the best product matters more than being first to market," they conclude.)

Which is interesting from a historical perspective, but I can't help but thinking, Well, duh. (I know, I know — hindsight, 20-20, &c., &c. (But — no. And the 20-20 thing goes just the same for the Economist, too.)) I also can't help thinking, from a historical perspective, the argument misses the point: Internet startups weren't just competing for markets, they were competing for investors, and first movers had a distinct advantage in that fight. It turned out, of course, that many of the things that attracted investment in these companies had little bearing on their ability to ultimately succeed as businesses — and the first-mover advantage was just one of those many things. Even if this was one of the biggest mistakes, as the Economist writes, uncovering the various lies entrepreneurs fed to VCs (who fed them right down the line, of course) to get their money isn't really all that interesting, is it?

(If you are looking for something interesting in the article, however, the Economist does do a good job of analyzing "lock-in" in general, including the somewhat surprising observation that (according to Liebowitz) there is no known instance of strong lock-in (in which consumers shun a superior product because of concerns that no one else will use it combined with the necessity of widespread acceptance for them to prefer it over the pre-existing competition).)

October 8, 2002 2:21 PM

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Copyright ©2001-2003 Matt Pfeffer

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