A good idea and its profitability

Many people have good ideas which they believe will help them to earn lots of money; however, not everyone is able to be a billionaire with his or her smart idea. The profitability of one’s idea depends on the barrier that the idea creates. Why could Bill Gates be the richest man in the world? Not only because he is smart and good at programming, also because his idea cannot be copied easily by others (not just because of the copyright) that most of people cannot persuade computer makers to install their softwares even when they have good software and creating such large program is not an achievable task for most people. Moreover, when more and more people are using Windows, the barrier is built higher and higher, as we can see that people who are using Linux or MacOS are using these two softwares’ specific features, for most people, Windows is more convienent.

On the other hand, we can see many examples that people have good ideas but become harder and harder to make profits. For example, private equity firms love the idea of “buy-and-build” and the number of the investments using this strategy accelerates. However, the increasing popularity squeezes the profitability for the private equity firms. They are bidding over each other and making the costs of buying small firms more expensive. Of course, there is still some room for them to make profits; however, because it is easy for others to copy the strategy, as long as there is an existence of a profitable opportunity, more and more people will enter and increase the competition, thus lowering profitability.

To conclude, if someone can have a good idea about a particular strategy, he or she can earn huge profits in the beginning, but when more and more competitors who use the same strategy appears, the profitability will be lowered. This makes people lack incentives to be more creative in terms of strategies rather than technology, as technology has much higher barriers.