Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.
Adam Smith, in Wealth of Nations, talked about an “invisible hand“.
Basically, by businesses pursuing their own interests, they end up helping society much more than they had intended, led by an “invisible hand”.
“…he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention… By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”
This same “invisible hand” is behind the success of many of the most popular web and mobile services that exist today. And, by understanding how it works, it can dramatically change your initial product decisions.
What is the Invisible Hand of the Internet?
The best way I can explain is to use an example almost all of us are familiar with: Delicious.
The amazing thing about delicious wasn’t that it allowed you to save and tag your bookmarks on a site. I liked that functionality and it was useful. But, ultimately, not everyone really needed that service.
The truly remarkable thing about delicious was that when enough people saved and tagged their bookmarks, you could see what the most popular bookmarks were for a tag like “python“. That collective wisdom was truly amazing.
But, users weren’t really uploading their bookmarks to the site and tagging them so that others could benefit from them. They were uploading their bookmarks out of their own self-interest. People wanted to save a bookmark with tags so that they could easily search for them next time they needed it. If people really didn’t need to tag their bookmarks, most of them wouldn’t have done it just for the benefit of the overall site.
The self-interested actions of delicious users ended up promoting the interests of the delicious community much more than they had intended to, led by the same “invisible hand” Adam Smith talked about in 1776.
How Does it Affect You?
I was recently talking to some struggling founders. They were telling me about how great their startup was going to be.
Founder A: “Once users start doing X, imagine how awesome the aggregated data will be for everyone.”
Me: “That does sound interesting but why would a user do X in the first place?”
Founder B: “Because they will be contributing to the aggregated data.”
Me: “But, if you assume they are selfish and busy, why would they do it?”
Founder A: “I guess we’re still working on that.”
People are largely driven by their own self-interests. As entrepreneurs, it’s too easy to fall into the mentality that people will use your product because it will help the overall community of your product. They won’t.
Do not get caught underestimating how much your product needs to personally reward a user for their actions. People’s time is a zero sum game and you’re competing against Facebook, YouTube, pictures of LOLcats, and way much more.
Before you can start thinking about how big your network effect will be, you need to really nail the single player interaction.
And, hopefully, if enough people use it, you can create an even more powerful service by leveraging all of their individual uses, just like Delicious did.
Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.
