This is a continuation of last week’s featured blog post.
There just aren’t that many long-term resource allocation strategies (“business ideas”) that can outperform existing configurations (“established competitors”) on a long-term basis. If you don’t know when to cut your losses, you will find yourself saddled with a business constantly in search of resources temporarily available at below-market prices (“arbitrage”).
Most businesses are arbitrage hunters; they just don’t see it in that stark light. Being an arbitrage hunter is a lot of work, but some people are exceptionally good at it. Some people make a lot of money hopping from one temporary situation to the next. A good segment of stock market activity is dedicated to finding and profiting from arbitrage.
My best advice to arbitrage business owners is to remain wary of the tendency toward searching for unrealistic discounts. Bad deals are just a little bit past the good deal and can consume incredible quantities of energy and capital to evaluate. When people contact me and lament about a series of worthless engineers and thousands of dollars wasted, I know that they have gone too far in search of discounts and likely don’t recognize that they are in an arbitrage business to begin with. The vicious spiral is that they usually feel like they haven’t gone far enough. It’s kind of like the stories you hear about pilots who go into a death spiral. The plane is turning at exactly 1G-force which feels exactly like flying level, except that you’re headed for the dirt.
If you are in an arbitrage business, find the best programmers you can at the best price, but then stop before you sacrifice quality. My assertion throughout this blog and site is that I am the best programmer you can find, at the best price, without sacrificing the quality you need.
