The Koan Mu

Lewis on Kessler's¹ algorithm on upstarts and incumbents

1. Rules are established to create order and maintain profits for incumbents. Examples of rules are: social mores, professional licenses, government regulation, locked-up distribution channels.

2. Cheaper technology suddenly allows for the bypassing of the rules.

3. Incumbents are fat and dumb and happy with current monopolistic profits and their general situation so they badmouth any new stuff which threatens their incumbency or profits or both.

4. Fringe players emerge to use this ever cheaper technology to simply ignore the rules.

5. Fringe companies attract venture capital since there are great profits to be made underselling the incumbents.

6. Incumbents are in denial until their profits are really threatened and/or market share begins to erode meaningfully.

7. Chaos ensues; fringe players are threatened with lawsuits, government regulation, public shaming, etc.

8. Growth at the fringe accelerates as it is the right way to do business using new technology.

9. Incumbents co-opt the fringe or fringe players become the new incumbents and seek to establish new rules.

10. Go to 1.

— from Michael Lewis, The Future Just Happened (Hodder and Stouton, 2001)