Marketplaces: Are they just a big bang?

Physics and Economics were my favorite subjects in high school. What fascinated me was that both disciplines study complex systems put in place by nature and/or man.

Both have a strong empirical component (Macro economics/Quantum Physics) and a strong deterministic component (Micro economics/Classical Physics).

No wonder most Physics PhDs end up as traders on Wall Street. Or more recently, Data Scientists at Facebook.

Being a poster child capitalist, I wanted to explore using concepts defined in physics to better understand marketplace phenomena.

During the inception of marketplaces, there are a lot of unknowns. How many buyers are going to show up? How many sellers are going to show up? What goods will be sold? What’s going to be the starting bid?

The answers to these questions during the early stages will ultimately decide the characteristics and long term fate of the marketplace.

That’s exactly what happened during the big bang. The basic chemical DNA of the cosmos that was created during the first few moments decided the elements necessary for life to exist and governed the behaviors of species for the consequent eons (and still does).

Ok, so what? Being an early participant during the inception of a marketplace can you give significant power towards influencing the ultimate natural state of the marketplace.

For example, the bitcoin marketplace was officially “created” when the first transaction was completed in February 2010. Although the behavior of the bitcoin marketplace is largely determined by an algorithm, at the initial asking price of $0.01 per BTC you could buy a huge chunk of bitcoin and ultimately own a large piece of the marketplace.

Yes, hind sight is always 20/20 – but if you understood at the time a new marketplace was forming, you could’ve capitalized on the opportunity.

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4 thoughts on “Marketplaces: Are they just a big bang?

  1. @amertali: are you planning on diving deeper into the principles of a beginning marketplace? For example, what trends from the past can we decipher that have led to successful vs. unsuccessful marketplaces?

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  2. Hi Yannick. Thanks for the comment. As the first person to comment on my blog, you get 1000 karma points! ;). It’s a great question – it’s definitely something I’d like to explore further. I think in general we’re going to see a rise in new technology enabled marketplaces and there’s bound to be certain principles that always hold true. The exciting thing about technology enabled marketplaces is that design and product play an extremely critical role – not the case in “traditional” marketplaces.

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  3. A marketplace is only as good as the goods it trades. We have a lot of people chasing the creation of new data marketplaces these days.

    I’m more interested in the trade velocity of certain items than the actual marketplace creation process.

    Which two parties want to desperately trade, but haven’t coupled yet?

    It’s the only question that intrigues me regarding marketplaces these days.

    The goods.

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  4. Hey Kanishk. Great thoughts. Being the market maker rather than market participant is always more fruitful :). You mentioned data marketplace – but does a true data marketplace even exist? I can’t even count the number of op-eds I’ve read on how data is the “new gold” or the new “natural resource”. Gold and Oil both have commodity markets and exotic derivative instruments through which you can trade. Does that exist for data? Or maybe bitcoin derivatives is what allows us to create the first data marketplace?

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