| "What does this have to do with anything?" It means building a site like instagram, with zero revenue, can be very profitable if it competes with a revenue-generating site like Facebook. It is also repeatable. Re: Lottery Ticket Survivorship bias is not the same thing as playing the lottery even if the statistical probability of success launching a start-up or winning the lottery was identical. Instagram successfully built the technology, acquired the user base and sold to someone who found them valuable. I don't think luck has anything to do with building a company. Bad luck is how losers explain their losses rather than learning from the loss. Re: Non-linear consequence You borrow $1,000 and service is $10/mo. The basic loan covenants would define a default if you can't pay all $10 in any single month according to schedule. That means $9.99 service of the debt gives the creditor legal capability to seize the entire collateral--business. Fixed operating expenses can be viewed like debt service in that the economic entity breaksdown when all expenses can't be covered. If the profit margin goes to zero, a company is still running, but extremely vulnerable to random economic volatility. |