"The chief economic consequence of the creation of derivative securities was to price the risk more accurately, and distribute it more efficiently, than ever before in the long, risk-obsessed history of financial man. The chief social consequence was to hammer into the minds of a generation of extremely ambitious people a new connection between ‘inefficiency’ and ‘opportunity’ and to reinforce an older one, between ‘brains’ and ‘money.’"

"Moneyball"

Ergo Pandora…

We’ve entered a new world of winners and losers. You get to decide which side you want to be on. The old saw of starting at the bottom and working your way to the top is a fallacy, except for those gaining knowledge along the way, ultimately utilized in their own independent efforts, as opposed to those expecting to be rewarded and moved up the corporate food chain.

If you want to be a musician, hone your skill and follow your muse.

If you want to be a businessman, you’re going to have to be much smarter than the average bear, hard work will not be enough, not in industries like entertainment where it’s hard just to stay in, never mind win, you’re going to need an edge.

Future winners will not be those who went to music business college. The most those graduates can strive for is middle management. Those who succeed in the future will be rank outsiders, crashing the party, like Tim Westergren, with Pandora.

Westergren noticed an inefficiency in the market. Traditional radio excluded too much music and was peppered with too much you didn’t want to hear, not only music, but commercials and verbal drivel. What if you could deliver a music discovery platform that was closer to people’s desires, without all the detritus?

Pandora went public. Westergren is the one with the riches now.

Where are the inefficiencies? How can you amass data to quantify the status of the landscape and get insight into a path for the future?

That is your challenge.

Listen to no one who says otherwise. They’re just invested in the past, you’re invested in the future.

How can you eliminate as much chance as possible?

Westergren’s reliance on hired critics is not as good as Slacker’s reliance on deejays who program, but Pandora wins because of externalities. Being first in the marketplace, owning word of mouth. He who is the best doesn’t always win, success comes to he who gets the word out, who gains traction and maintains it.

And if you’re really good at it, you own the sphere. Until that sphere dies or you take your eyes off the ball.

We don’t need a better algorithmic search engine. We’ve got no problem with Google. Maybe a complete rethink might succeed, but it’s no wonder Bing is a money-loser. I don’t have a search problem, do you?

Then again, Google is being challenged in the mobile sphere and many now get their information from Facebook.

And having built so much infrastructure, Amazon is now killing its competitors not only with its buying power, but the vast trove of data it has regarding its customers. Amazon knows what people want. That makes it easier and more cost effective to deliver it to them.

If you want to be Jimmy Iovine, don’t do what he does, try to do better than what he does.

Create systems that allow you to spend less and make more for your acts while still delivering success. It’s very tough to beat Jimmy at his own game. But the field is wide open for a new game.

Read all the self-help books you want, but they’re a waste of time. They’re mostly about instilling confidence. Providing insurance that you’re on the right path.

If you don’t believe you can win, you’re not gonna.

If you need insurance you won’t take the risk.

But don’t take the risk without modeling. A hunch is not enough.

It looks like Steve Jobs creates products on a whim, but that’s not true. He’s aware of the cost of components, the delivery chain, the ability to partner with rights holders. You only venture into the unknown when you know as much as you can about what is able to be known. You do your best to make sure you succeed.

And your success is based on insight.

Steve Jobs saw that MP3 players were inefficient. Hard to use and hard to load music on. But he saw a burgeoning market for MP3s. Ergo, the iPod.

And telcos had built out high speed wireless, but every handset available, i.e. the BlackBerry, first and foremost, was terrible at surfing the Web. The BlackBerry is still terrible at surfing the Web, which is why it’s declining in popularity. Jobs saw all this and created the iPhone.

Even the iPad was a refinement of what came before. And ultimately a larger iPhone, not that big a stretch.

Not to denigrate Apple’s achievements, just to illustrate they were not build on thin air.

Sure, you’ve got to have an idea. But ideas are not as hidden as you think. They’re hiding in plain sight for he or she who can synthesize the existing data.

And then you need an edge.

The edge in "American Idol"?

19/Simon Cowell held the recording rights to the winner, and this was their area of expertise, so they could utilize TV to build recording stars.

It’s all about the edge.

Without it, you won’t win. Not for long.