I am always on the lookout for books by entrepeneurs, strategic thinkers and VCs to help shape my understanding of technology, leadership and how I can help drive growth at Localeur. I recently read a 1996 paper titled, "Increasing Returns and the Two Worlds of Business" by W. Brian Arthur, a then-Stanford Dean & Professor. It may be something you want to read yourself if you're into this kind of stuff.
Here are some parts I particularly liked.
Above all, strategy in the knowledge world requires CEOs to recognize that a different kind of economics is at work. CEOs need to understand which positive and negative feedback mechanisms are at play in the market ecologies they compete in. Often there are several such mechanisms—interbraided, operating over different time frames, each needing to be understood, observed, and actively managed.
In the processing world, understanding markets means understanding consumers’ needs, distribution channels, and rivals’ products. In the knowledge world, success requires a thorough understanding of the self-negating and self-reinforcing feedbacks in the market—the diminishing and increasing returns mechanisms. These feedbacks are interwoven and operate at different levels in the market and over different time frames.
As the economy shifts steadily away from the brute force of things into the powers of mind, from resource-based bulk processing into knowledge-based design-and-reproduction, so it is shifting from a base of diminishing-returns to one of increasing-returns. A new economics—one very different from that in the textbooks—now applies, and nowhere is this more true than in high technology. Success will strongly favor those who understand this new way of thinking.