Exit is more powerful than voice

In this post, I wrote about how competition and choice is important for encouraging bottom-up innovation. When we say things like “roads are socialized” we gloss over something very important. There isn’t a single road department. There are many. We have Federal highways, state highways, county roads and city roads.

Each department operates somewhat independently and tries different things to solve the problems they face. Every now and then, one happens across an improvement that works well and other road departments can choose to adopt it. That type of innovation would not happen as often if there was a single road department that pushed one set of standards.

Alex Tabarrok of Marginal Revolution makes this point well in this post about how education was rebuilt in New Orleans after Katrina, when describing the source of innovation in education:

What really drives innovation, however, is not a simple substitution of private for public but a system substitution of competition for monopoly.

I agree. In the comments of his post, I suggested re-framing this in terms of the benefit to the user (edited slightly here):

It is not a simple substitution of a choice between free-to-the user public and cost-to-the-user private, but a system substitution of more choice by the user.’

We often get hung up on the public/private distinction. That doesn’t matter as much as how free the users — the direct beneficiaries — are to make a choice.

The freer the users are to choose to exit their current option if it isn’t working for them, the better.

This dynamic drives innovation. Why, you might ask? Because the freer your users are to leave you, the harder competitors will try to give your users what they want to encourage them to leave and the more honest soul-searching you may do to figure out why your users are leaving you. If you can’t figure it out, you end up going away.

My parents decided to move to exit a school district that wasn’t giving them what they wanted. That choice was much more powerful than their voice would have been had they decided to stay and try to change the direction of the school district.

So, whenever we think about why one system works and another doesn’t, maybe we should think in terms of how free users are to choose.


Innovation Diary – Entry 1

Image representing iPhone as depicted in Crunc...

Will they want it?

Inspired by Felix Dennis, Nassim Taleb and Hayek, I’m trying something.  I may fail.  I may make a bunch of mistakes (after all, it’s a trial and error world).

I’m starting with an idea I have for an application for the iPhone and other mobile devices.  It’s relatively simple and it’s something I think would be helpful for me, as a parent, and something I can use to help educate my kid about an important topic. I think other parents might be interested in it too.  I think certain types of companies could be interested in sponsoring it.  I also think it can spawn a revenue stream from a companion website.

I’ve sketched the idea up in a Powerpoint and have a rudimentary prototype in Excel.  Yesterday I met with the head of a local app development company.  He liked it.  He said he hears a lot of ideas and he doesn’t hear many good ones.  But then again, he could be wrong and I could be wrong.

I’m concerned that I made my first mistake in disclosing too much of the idea to him, but his firm is relatively big for such things and I’m banking on reputation that they don’t make the habit of robbing people of their ideas.  But, I could be wrong.  He mentioned that he might be interested in a joint venture on the project.

I’ve made a rudimentary prototype, and I’m adding to it get the functionality I envision for the final product and plan to work with the guy over the next couple weeks to research to see if there’s anything like it out there and explore my relationship with him more.

I imagine that working on this project will take some time away from my other blogging, so I thought I’d blog about my experience, my trials and errors and the evolution of the project.  I’ll keep an innovation diary here.  I will still blog on other topics too when time permits.   Feel free to chime in act as my board of advisers, of sorts.