Chocolate and Gold Coins

Friday, April 14, 2006

1YAT: Magic in the Marketplace

One year ago today, I wrote Magic in the Marketplace:
The key to wealth is having a magic technology. Technology, in the sense that I’m using the word, is any means that you might use to take inputs (labor, capital) and turn it into a finished product or service that customers will buy. McDonald’s might be considered low-tech, but in reality that have sophisticated technology since it isn’t so easy to take high-school students and transform them into a force that produces a consistent quality product. Likewise, Wal-Mart is a very sophisticated technology. There are lots of people who would like to know how they do it.

Technology comes in two types: clone-able and magic. Clone-able technology can be duplicated by anyone simply be observing the end product. A chocolate-dipped frozen banana is clone-able. A really big paper clip is a clone-able. You don’t make any money from going into business by trying to create a new market with a clone-able technology. If you want to make money, you must have a magic technology – a technology that no one can figure out how you are doing it.

This was easily the best piece I wrote in the month of April 2005.


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