Ecosystems appear to progress through four stages as they grow and mature:

(Note: I think the research ecosystem follows this as well…)

1. First come a handful of pioneers to the ecosystem – the ones who show everyone that something is possible or popular. These companies either fail or become entrenched market leaders – there is no middle ground, as the winner will become synonymous with the market. It is possible for a company to “win” a small market but fail to grow it into a new paradigm – in that case, the market will remain relatively stagnant until a pioneer with a larger vision or better ability to execute grows it. At least one pioneer must achieve both a strong market presence and a solid trajectory for the ecosystem to achieve the wild growth and optimism characteristic of the next stage.

These companies are distinguished by the novelty of their markets, and by their brand’s synonymous association with those markets. Their primary form of innovation is opening up and capturing completely new market segments.

Friendster, MySpace, Facebook, Groupon, and YouTube are examples of these types of companies. So are RIM and Palm, which captured the early mobile market but were unable to grow mobile beyond a niche product (ultimately, I categorize these as failures, and Apple as the first successful pioneer in this market).

2. Next come the clones. The successes of the pioneers spawn explosive growth, both general-purpose “me too” offerings and niche-targeted variations. These will very rarely displace the entrenched players; more often they become secondary offerings with lesser brand value, leading to fragmentation of the market. Some niche players, such as LinkedIn, can become surprisingly large – often this is the case when the leader’s niche poorly overlaps with the newcomer’s. It’s common for established players in adjacent markets to see the growth of the new area, and enter with their own offerings at this stage.

These companies are primarily valued for their brand recognition by consumers (since the space is becoming increasingly crowded at this point). They innovate by addressing specific market needs which were suboptimally fulfilled by market leaders, as well as leveraging their existing audience to gain traction in the new space.

Amazon Local, Gilt Groupe, Google+, LinkedIn, and Etsy are examples.

3. So many clones establish themselves that there’s now market value in aggregating/centralizing the results. So market plays at unifying the entire ecosystem are next to emerge on the scene.

These companies are distinguished by the comprehensiveness of their feeds or offerings. Their primary form of innovation lies in establishing the partnerships and integrations necessary to unify an at-this-point extremely diverse ecosystem. Occasionally one will emerge with a value-add enabled by the integrated nature of the data.

This focus on comprehensiveness typically leaves aggregators little room for optimizing consumer interaction/*delivery* of content. They become providers of unified data streams, and eventually provide platforms for accessing those streams.

Mamma.com and other “meta-search” engines are examples. Yipit and 8coupons fall into this role, as do Gigya, TweetDeck, Trillian, and Zillow.

4. Finally, the delivery experience is optimized. The core value proposition of the industry is at this point saturated and nobody wants to hear of “another X”, but the centralization of the ecosystem affords newcomers a clear path to the market’s table stakes, allowing them the luxury of focusing entirely on optimizing *how* consumers interact with the data or product.

These companies are distinguished by their user experience, consumer reach, and new angle on an old technology. They innovate by reaching consumers (both qualitatively and quantitatively) more effectively than other players in the industry and by seeding new adjacent markets which spin off around the delivery technology itself – which can open up new markets and cause the cycle to repeat.

“Demand Side Platforms” in advertising such as Invite Media and MediaMath are examples. So are Square, Shopify, Wix, and Tinder.

You can prove results in computability on economic systems. There are classes of problems that are insoluble in a given economic system. In a system such as capitalism where money is held by individuals and spent at discretion in order to maximize the holder’s return, there are two: “refactorings”, which make systems more efficient but have no direct short-term benefit, and “synergies”: problems that raise the standard of living of an entire group significantly more than they raise the standard of living of any given individual. Money is not zero sum because new value can be created, but spending decisions (taken individually at a single point in time) are zero sum, because you have a fixed amount to allocate among a collection of spending choices.

Game theoretically, a rational player in a capitalist economy will always try to spend money in a way that provides the greatest return for himself, monetary or otherwise. A player with knowledge of other player’s strategies will attempt to tie his own monetary gain to the monetary gain of as many other individuals as possible given his resources (this is, for example, where VCs came from). However, this is not the same as providing a benefit to the group as a whole; the holder must reach out and touch everybody directly, because only individuals can make spending decisions. (Corporations, for the purpose of this exercise, can be treated like wealthy individuals, since a corporation’s members usually have common motives).

It’s possible (indeed, easy) to construct a problem which has little individual benefit to the individual members of the group while having an overall benefit to the group’s welfare: for example, reducing carbon emissions, or cutting the use of pesticides in produce to prevent bee populations from collapsing, or becoming a space-faring civilization while there are still few extraterrestrial resources to exploit. These problems all require major changes in behavior, which require investment (as in physics, no Work gets done in the economy without an expenditure of energy/capital), but their benefit to individuals does not justify the investment, even though their benefit to the group does.

These problems are literally outside of what a rational capitalist economy can solve (similar arguments can be constructed for other economic systems). Since we inhabit a mixed economy, and since not all players behave rationally in a game-theoretic sense, the lines are fuzzier in the real world. But the rational strategy will always point to the mean behavior of the system.

Intriguingly, you can bin the ranges of problems available to be solved into classes (much like we do in computational complexity), and use class coverage as a measure of an economic system’s efficiency.

Should we continue to inhabit a mixed economy, the government has then found a just task to take up: aggregate economic interests so that efforts which provide the greatest benefit to group welfare also provide individual returns (and then recoup the difference proportionally from the groups that benefit most, preventing a Robin Hood economy from emerging). This would then increase the coverage of soluble problems within the economy (and the diversity of economic activity taking place), and quantitatively increase its efficiency if measured according to the paragraph above.

Capitalism is an instance of feudalism, with money replacing land, corporations replacing fiefs, wealthy individuals replacing lords, skilled workers replacing warriors. I’m convinced that the feudalist pattern represents the intrinsic form of government that humans will form when left to their own devices, so this was inevitable.

However, the genius behind capitalism is that it tied acquisition of resources and power to human advancement. You can’t take money by force; you can only acquire it through consent, in exchange for providing a good or service which the buyer values more than the money. People who would otherwise be fighting wars over territory are instead doing their hardest to create and sell products. Sure, all sorts of underhanded and disgusting things happen on a routine basis, but ultimately, effort that would be put into killing is instead put into trade – that’s a tremendous accomplishment.

Social networking, for instance, is a good example of an analogue to Fisherian runaway: the desire for the trait and the trait itself coevolve, until everyone has social because everyone wants social, rather than because it adds any functionality, value, or relevance. I suspect most social movements, and in fact traditions, are like this.

The first and second factors are of equal importance in the psyche and the same evolutionary tendencies which support survival also support culture (and all of the baggage that comes with it). This is because for a long period in our evolution the two were identical – culture was our memetic means of survival, as things like migratory flight routes were those of geese. What’s more, you can apply the same evolutionary rules and look for the same evolutionary patterns in culture as you can in biology. Some mass movements are actually excellent examples of Fisherian runaway applied to the propagation of ideas rather than genes.

Videos and music become popular because people like to minimize their risk of wasting time listening to or watching something unenjoyable. Actually, I suspect something similar lies at the heart of popularity in any context.