Frustration = Opportunity

Thinking about it, people move into something new only if the old is not working for them any longer. If that's the case, then frustration is the driver of innovation to a much larger extent than the realization of opportunity. The interesting thing about this notion is that frustration is measurable, while opportunity is not.

You can ask people what they don't like about the world around them. Usually they won't give you accurate information, since they have no understanding of their own pain – but that still beat asking yourself what opportunities there are out in the world. Even when you find an opportunity, you'll have a hard time selling it to others if there is no pain associated with it; that's my summarizing of the Internet bubble: solutions to problems nobody had. 

You can easily see how growing frustration has paved the way for some online retailers: case in point Amazon. Once, bookstores were community information centers, places where you would ask for advice, a pharmacy for the soul. Enters Border's, and the bookstore becomes a book store, a supermarket for pages, bent on maximizing profit by showing you a selection of books that has nothing to do with what you want, but mostly with what the editors, publishers, and book seller want to give you.

There used to be something (a book community), then there was nothing. The Internet had an easy play here: recreate the community experience around the book, and you can take the market away. Amazon did just that, and it seems to be very focused on the notion of the community, strengthening the features that point towards it.

In other cases, frustration is not as easy to pinpoint, but can be factors worse. That became obvious with the P2P revolution, which is sweeping away most of the pre-existing music distribution channels. We are not very far in the revolution, yet, but it is highly predictable that the end result will be a Cambrian explosion of music: genres we've never heard of, groups we didn't know existed. Word of mouth (or of keyboard) will make this possible, and there will be a lot more professional artists making a lot less each than the Madonnas and Britneys today.

There are areas where the frustration is enormous, but it cannot be easily overcome because it is tied to a legal framework. Things are improving there, too, but at a much slower pace. Or do you think if the DMV weren't a government entity, it would have waited until last year to automate so much of its function?

In the private sector, though, there are several areas that are largely untouched by Internet innovation, despite massive frustration and a lack of legal framework. The most notable are, I'd say, the financial and insurance industries.

That needs to change.

[Part 1 of a series] 

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