"The lesson instead is: build something whose very nature makes it a cannibalistic cash flow hit for a BigCo so that their shareholders resist competing, but which their users love."<p>Can anyone explain more what he means by that? How can something that is a cash flow hit for a BigCo not be a cash flow hit for anyone else?
I think to understand @daltonc's strategy with join.app.net, one should be familiar with Thomas Schelling's concept of 'precommitment':<p><a href="http://en.wikipedia.org/wiki/Precommitment" rel="nofollow">http://en.wikipedia.org/wiki/Precommitment</a><p>Note that the 'textbook' examples of precommitment involve the burning-of-bridges or burning-of-ships-at-the-shore.<p>If there's any hope of an alternative to Facebook/Twitter at this point, given the incumbents' long head-starts, it's going to be a 'zag' to the incumbents' advertising-supported 'zig'. Caldwell might not have gone <i>into</i> his Facebook meeting fully intending that sort of confrontation... but by the time he left, the choices were stark.<p>I thus view Caldwell's anecdote <i>not</i> as a complaint, "boo-hoo I was wronged", but as him sharing a difficult lesson: that Facebook's model makes it impossible for Facebook to be a magnanimous platform steward. Perhaps Caldwell should have seen the writing on the wall earlier, but many exterior-platform shops are missing the same point, as evidenced by the surprise and indignation after each new consolidating move by the platform proprietors.<p>Perhaps Caldwell could have intuited the reality beforehand, and written about it in abstract terms. The anecdote <i>illustrates</i> the problem, in a way that far more independent developers will understand.
pmarca has been a personal friend and mentor to me for over 2 years. I have learned a <i>lot</i> from him.<p>I know where he stands about all of this. I don't want to drag him into this fight any more than he already is, but I don't think you understand pmarca very well.
Scott - you say
"It’s incumbent on you (and certainly also me) to make sure that we’re starting businesses in segments that actually require a new entrant and can not be filled by aproduct line extension from an incumbent. Whether or not they fill holes as early as Twitter, large companies with developer programs all consolidate their segments — and do so a economically as possible. That means every third-party developer grows up, sells cheap, or dies."<p>But what does ‘require a new entrant’ mean here? Who requires it? There is surely only one meaningful answer - the consumer. Moving on... What sort of new entrant offering ‘can not be filled by a product line extension from an incumbent?’ I suggest in the context we should parse this to mean ‘... platform company cannot build a competitive offering.’ But of course, there is little that such well financed companies who control the platform can’t build. More to the point there is still less that can’t build if all they have to do is copy an existing product. So this is a very strong condition. Perhaps you mean - software the platform company doesn't want to build? One answer along these lines is to build software for a small segment the platform company cannot be bothered to address. But for an ambitious developer who wants to add significant value to millions of users I am not sure it is possible to develop such an offering - insulated from potential competition by the platform company - unless the platform company has a clear policy vis a vis developers and provides very clear signals with a very clear record to trustworthy behavior that gives a high degree of confidence it is safe to proceed. But of course developer is taking a risk that the platform company can bait and switch. I am unsure what ‘large companies with developer programs all consolidate their segments’ means. But if it means that such platform companies have an inbuilt drive to purchase their devs I can’t agree. The big platforms have so much software on them that even the wealthiest company couldn’t buy it all even if they wanted to. I don’t know what a cannabilistic cash flow is. This may be a term of art I am just unfamiliar with. But if it means a cash flow built on the back of the host platform, this surely refers to the cash flow of all apps built on a platform. So I am unclear this idea moves the ball forward. If on the other hand the idea is that it will cost the host money for no clear ROI then this is indeed always possible, but just as obviously if there is no clear monetization strategy the dev is taking a huge risk. It can work out but of course most times, not surprisingly, it doesn't. (Clay Christen makes much of this dynamic and the challenges of marginal rather than absolute costing when he discusses such cases as Blockbuster competing with Netflix. But the undiscussed part of his argument is the hindsight effect. Blockbuster were right to ignore most of the market entrants. Most never got any traction. With a thousand flowers trying to bloom, which one will see the sunlight?) So building software that doesn't seem to make financial sense will doubtless reduce the risk of the platform company competing, but you'd better have something up your sleeve. The Instagram example is indeed important. But it is important precisely because of the very different behavior of Apple and Facebook vis a vis their devs. Apple has had long experience of working with devs and a deeply wired understanding of how to foster and manage relations with their developers. iOS is a platform. Apple provides some core apps but other than that it is a free range and the overwhelming majority of devs can be confident Apple isn’t going to compete with them. It seems to me that the whole point of DCs argument is that Facebook declared itself a platform, provided APIs, provided assurances that his product was seen as valuable and would be welcomed and then, having given him the confidence to build it, turned on him threatened to cut off his access to the platform on which his app relied and then offered to buy him out. This is very different behavior.<p>So to be honest, I don’t find the argument very clear. I’m not sure we agree on what the responsibilities of a company that declares itself to be offering a platform are. I can’t extract a convincing strategy here for how you feel devs can best to develop on a platform. And whilst you seem to feel you have some sort of lesson for DC about how to work on a platform even if the company baits and switches, I can't fathom what that lesson is.