We tend to believe that innovation is the key to market success.
This is often untrue. The value may lie hidden and may not even be in the innovation itself.
Imagine you develop a new cryptography technique to encrypt emails and even intelligence agencies cannot crack it. Who wants this more than anybody else? Drug cartels!
Will they be willing to pay for it? Yes. Will they be willing to pay you for it? No. The value here is not in the cryptography. It is in trustworthiness. No drug cartel will trust you. They will assume you are working with intelligence agencies.
But if you had grown up in a family of drug mafia, they will trust you. Then they will buy from you. So the real value is not in the technique. It is in trustworthiness.
Bitcoin is hailed for decentralization. That is a weakness, not a strength!
The value does not lie in decentralization. It lies in the technology. Governments do not want a parallel, decentralized monetary system.
If Bitcoin reaches such a scale that it becomes a parallel system, governments will regulate it. They will use the underlying technology but prevent decentralization.
Ironically, because Bitcoin is decentralized, it has limited lobbying power. In a centralized monetary system, banks, industries, home buyers exercise lobbying power through interest rates and inflation.
Let us take Twitter. It is software. But the value does not lie in the code. It lies in the network and the social connections. So anyone trying to build another such App with better features cannot easily succeed.
Before putting effort in innovation, match your dimensions of innovation to dimensions of value. Otherwise, you will not be able to get value from your innovation efforts.
