Entrepreneurship is mostly zero-sum

Published on December 22, 2025 6:33 AM GMTSuppose Fred opens up a car repair shop in a city which has none already. He offers to fix the vehicles of Whoville and repair them for money; being the first to offer the service to the town, he has lots of happy customers.In an abstract sense Fred is making money by creating lots of value (for people that need their cars fixed), and then capturing some fraction of that value. The BATNA of the customers Fred services was previously to drive around with broken cars, or buy new ones. Whoville as a town can literally afford to spend less time building or purchasing cars; the birth of Fred and his enterprises has caused the town's productivity to go up. But then let's say Tom sees how well Fred is doing, and opens up an identical car repair business ~1 mile closer to the city center. Suddenly most of Fred's customers, who use a simple distance algorithm to determine which car repair business to frequent, go to Tom. Now, Tom has certainly provided his customers a bit of value, because it is nicer to be closer to the city center. But that isn't really enough to account for all of the money he's now making. Mostly, Tom has just engineered a situation where customers that previously went to Fred's business now patronize his. In fact, if there were fixed costs involved in building the shop that exceeded the value of the shorter travel distance, you can imagine that society as a whole is literally net-poorer as a result of Tom's efforts. This is all true in spite of the fact that his business looks productive and doesn't produce negative externalities. Tom's business once created is a productive one, but the decision to start a new business was rent-seeking behavior.Most new businesses tend to be extractive in this sense. That's because it's much easier to make a slightly more enticing offer than your competitors, than it is to innovate so much that you can pay yourself from the surplus. Consider:The venture capitalist who optimizes his due diligence process to spot new seed-stage startups a couple weeks earlier than others can. He's not any better at picking startups, and he's selling an undifferentiated commodity (money), yet he's able to snap up many of the obvious opportunities by leveraging a suite of social media crawlers. The founders shrug and take the same money they would have accepted a month later had they sent a few emails.The sushi restauranteur who creates the 11th sushi chain in downtown SF. He labors all day on his product, just like the rest of the restaurant owners. The sushi might is only slightly better, enough to grow the market by 2%, but the net result of his marketing is that 15% of the rest of the city's customers move to him.The technology founder who starts the third payroll company. By https://techcrunch.com/2025/06/05/rippling-calls-deel-a-criminal-syndicate-and-claims-4-other-competitors-were-spied-on-too/

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