P(Success) is highly correlated with (Marginal Value / Marginal Cost)
The original Snapchat app succeeded because the marginal cost is low (everyone already has a smartphone) and it provides a good marginal value to a subset of population (over other social networks).
Spectacles carry higher monetary and more importantly convenience and social costs to use and add little extra value beyond existing solutions.
The same framework could be applied to Uber, AirBnb, ... as well as many startup failures. Note that P(Success) or probability of success implies that there are factors other than those included in the model.
I’d love to have refinements or counterexamples to the model if anyone is interested.
The entire luxury market disagrees with this. This isn't a small market: companies like Louis Vuitton, BMW, etc (and even arguably Apple) are huge, profitable entities selling large numbers of goods to large numbers of people.
Even outside the luxury market there are numerous other factors, not least of which include: distribution, vitality, marketing etc.
Edit: Also there are at least three Nobel prizes showing how marginal value isn’t what matters in making choices (Nash, Kahneman, Thaler)
Distribution and marketing are good points. Inferior products with better marketing and distribution sometimes win out especially when they partner with monopolistic/oligopolistic channels.
What do you mean by 'vitality'?
Luxury products provide social signal value rather than pure performance.
I agree that imperfect rationality is a major factor in human decision making and perhaps should be included into the model somehow.
I'm not sure how Nash's game theory is related to this. Care to elaborate?
PS. I didn't downvote you and feel that too much downvoting, sometimes unwarranted, occurs on HN lately.
Luxury products provide social signal value rather than pure performance.
Social signaling is often (usually? Outside subsistence cases - there are some good studies showing how this switches over) more important than performance.
Sometimes performance and social signaling are correlated, but they don't have to be.
I'm not sure how Nash's game theory is related to this. Care to elaborate?
A product marketplace is pretty much the perfect example of a non-competitive game. Indeed, the New Yorker used is as one:
The setting could be nuclear negotiations, such as the ones currently taking place between Iran and the great powers. It could be a product market, in which a number of firms compete for business.[1]
This is a relatively mature field, and there are some fairly comprehensive ways of expressing the likelihood of success of a product.
Unfortunately your formula doesn't capture anything like enough of the complexities of a market place.
But hey - it is simple, and you typed it quickly, and it seems like it could be right so nothing else matters, right?
Virality without value advantage tends to be short-lived.
Social signaling is part of the ‘value’ in my model.
The utility of existing competition and their costs are included in the term ‘marginal’.
I am aware that my simple model, occurring in a couple minutes, is incomplete that’s why I asked for refinements. Including factors like distribution & marketing seems very useful. However, capturing imperfect rationality does not seem possible for a simple model.
Do you have references to the ‘fairly comprehensive ways of expressing the likelihood of success of a product’?
I don't know. There must be more factors. How else would you explain the success of companies like Apple, Tesla and Xiaomi. Or for that matter, to a certain extent every luxury product.
Marginal Value, MV(iPhone) ~= MV(crap, and most non-crap, android phones) (granted, this is probably not true for the original iPhone). But except for that one time it is certainly not true. The quality is clearly different, however.
Even more clear is the Tesla case: MV(Roadster) <<< MV(alternatives). It wasn't the best electric car, it wasn't the best car, it wasn't ... however again there was a clear difference in quality.
I would argue most real estate developments are equally examples of this (mostly because laws prevent them on competing on anything other than quality in most inner cities). Trump's whole empire seems an example of it too.
It seems to be entirely possible to achieve success by simply copying a badly executed idea, and doing it better.
I have an Android phone for purely economical reasons, but I tend to hate it, because it's buggy as hell, nothing really works the way it should.
Apple phones are way way overpriced but they're so much better than the competition. It's not true people buy Apple phones only for fashion reasons. The absolute value of an iPhone is vastly superior to the marginal value of any other phone, and the marginal value depends on how much you use your phone.
I don't use my phone very much so I can tolerate an Android phone; but if my personal or professional life depended on it, I would buy an iPhone.
You must have a very very cheap or an especially buggy Android phone.
Having used both Android and iOS I think it's quite clear that both platforms are just as buggy as one another with the recent iOS11 outpacing Android in terms of bugginess by quite a large margin.
When you buy an iPhone you are paying for the build quality and for the marketing, you are not getting an objectively 'better' phone.
You also pay for proprietary operating system. Which is a main differentiating point of iPhones. I have used all types of phones (iOS, Android, Windkws Phone, Symbian). Apple has the best operating system. It has superior UX, is most user friendly and has deep vertical integration with other Apple products.
That’s worth a lot of money to most users. I think more people are willing to pay premium to get the great operating system compared to hardware which might be secondary.
All of that is very subjective (and why do you state this as a 'fact'?).
If you don't use Apple as your main computer you basically have zero integration. Don't even get me started on interoperability (you can't even use the iPhone headphones on a mac??)
That the UX is superior is also highly subjective. There are many things that are either impossible to do or a massive pain to do on an iPhone; I would not consider that good UX (for example try looking at a picture you just took on your camera and apply some filters before posting it to instagram. The only way I have found to do that is to open instagram and open the picture in that app. The notification system is a massive joke. There are dozens of other such examples).
What is worth a lot of money to users is convenience and habituality. Having to change your habits, workflow and frame of mind can be quite taxing for some people.
Mobile phones and cars are used in public and many people associate their personal identity with them. Here are the key values I believe are provided by each of your example:
iPhone: signifier of good taste, ease of use (relative to Android), being well-off (in developing countries)
Xiaomi: middle class or upper-middle class status (in China), good value for money
I agree that current iPhones and Xiaomi phones do not provide much better features relative to their competition (no-name Android phones in the case of Xiaomi). Their values lie elsewhere.
Tesla Roadster: cutting-edge, environmental sensibility
In fact, by sales volume, Roadster itself was not a success. Tesla only sold 2,450 of them in 30 countries [1]. Model S provides much better value for cost and correspondingly achieved much stronger success.
Luxury products in general tend to be associated with social exposure. Maybe luxury mobs or floor cleaning liquid exist but either they do provide some special features for a niche or their sales volumes are relatively tiny.
P(Success) is highly correlated with (Marginal Value / Marginal Cost)
The original Snapchat app succeeded because the marginal cost is low (everyone already has a smartphone) and it provides a good marginal value to a subset of population (over other social networks).
Spectacles carry higher monetary and more importantly convenience and social costs to use and add little extra value beyond existing solutions.
The same framework could be applied to Uber, AirBnb, ... as well as many startup failures. Note that P(Success) or probability of success implies that there are factors other than those included in the model.
I’d love to have refinements or counterexamples to the model if anyone is interested.