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Altruistic Disruption

The New York Times just published a story called Death by Smiley Face: When Rivals Disdain Profit. It describes what we recently referred to as disruptive businesses -- a company that can grow while shrinking margins in its industry. In other words, a disruptive business can expand by making one dollar for every several dollars it takes from its antiquated competitors. Except The Times attributes the motive behind this business model to be altruistic, while we naively thought it was just a great entrepreneurial opportunity.

Their primary example is Craig Newmark, the founder of Craigslist. It's hard not to agree with The Times on this one. Craig probably has not made as much money as he could have with Craigslist without hurting user experience to the point that it would decrease traffic. If there was a one line AdWords-style ad in there, would you stop using it? This seems to be a good example.

It also cites FireFox as an example. FireFox is definitely not profit-driven as it's managed by the not-for-profit Mozilla Foundation. This is a pretty good example, but it only gets a couple lines in the article. It's also not strictly a disruptive business. Microsoft gives out Internet Explorer for free in part to drive traffic by default to its media properties. FireFox gets money from Google to drive users to its search site. Seems to be more of just an alternative.

However, Craigslist and FireFox are the only examples The Times cites that stands up to scrutiny for their altruism behind disruption theory. Their other two examples (which command most of the article) are:

I'm not making the Gekkoian greed is good argument. I'm not even saying that these entrepreneurs are enamoured with Ayn Rand. I'm just saying that disruption and integrity often make for good business in the long run, and to ascribe any other motive is the challenge of the author.

Now let's try to figure out the motives of some of the disruptive entrepreneurs we've had on the show:

Ascribing motives to the actions of others (or even to your own actions) is very tricky business. I hesitated to even analyze the motives of my guests before writing this post, but I figured if The Times can do it then so can we. However, if disruption does not require altruism, then this dubious analysis might not be necessary.

Posted by Greg Galant on Apr 1, 2006 | Permalink | Comments (1) | TrackBack (0)

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A friend of mine is using lala.com and can't say enough good things about the site. I've tried to get in, but it's in a closed-beta.

I'm sure they have a business model and plan on making a profit, but all David can talk about is how great the site is and how he's enjoying music again.

Posted by: Jim Westhal at April 2, 2006 3:53 PM

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