Yesterday I published a post over on Medium about Cloudflare’s competition in a particularly cloud service space. What I was interested in was the tactical approach they’ve used, which seemed somewhat Boydian. What I didn’t got into at all, though, is the implicit inadequacy analysis they’ve conducted, which applies really to any "disruptive" competitor.
By choosing to focus their product on a certain strength and a certain audience, they’re assuming the market has failed to provide for that audience and that capability, and has done so in a way they can exploit. Particularly in the case of their main competitor, Amazon, that is almost certainly because of Amazon are optimizing for different things. The question is, are Amazon's customers also optimizing for those things, and are customer in general?
Using Yudkowsky’s terms from Inadequate Equilibria, there may or may not be any "free energy" in the system: if potential customers optimize on dimensions that existing services are serving, then even though the current solutions are inadequate on some other dimension, they will remain preferred. I think there is a pretty high chance that there isn’t much in the way of free energy in the existing customer base for the services other companies are offering. I also think that there likely is a group who are not adequately served, but are too small to currently influence the broader market. Whether that group is also too small for Cloudflare remains to be seen (though I hope not!), while I can certainly look at some not-entirely-baked products from other players in the space and say with a pretty high confidence the inefficiency they have identified is not, in fact, exploitable.
I have found the concepts in Inadequate Equibilira to be rather helpful and thinking about market efficiency, exploitability and adequacy so far, but its still all rather new!