Then pick any other example. How about Scribd. There's easily 10m worth of upside, but no single point of failure. IMHO this makes it a better business than Loopt. Not easier in the sense of requires less work, but easier again in the sense that if it doesn't go viral the first day they can keep iterating until it does. And maybe it never will, but the chances of success are still much better because there are more options along the critical path.

edit: At any point if Scribd hadn't been able to add a zero to their traffic stats they could have leveraged their asset to do something slightly different. Loopt never had this luxury. If at any point they couldn't add a zero then the whole project was worth nothing. My point was that someone more experienced would have known this and chosen to start a business more like Scribd and less like Loopt. (If they only cared about the money.)

The problem with this thinking is that businesses don't exist in isolation. No points of failure mean no barriers to entry: if it's a matter of grinding through a pre-defined process, anyone can theoretically do it -- and if someone can raise a VC round and employ ten times as many grinders as you, they may catch up to you.

But someone competing with Loopt has different problem entirely. To even have a hope of competing, they have to make a deal with a carrier. And the number of available carriers drops as Loopt grabs more of them -- which gets easier with each one they get. When you're at the bottom trying to catch up, the fact that Loopt scaled a cliff instead of a foothill looks like a smart decision.

"No points of failure mean no barriers to entry"

Take my blog -> book -> consulting example. Right now if you have 25k blog followers and you are willing to spend 50k out of pocket it's pretty easy to game the system to become an NYT bestseller for one week. If everyone did it then the the numbers needed would be higher, but right now the number of people willing to do the two prerequisite steps is low enough that this is about right. There is no point of failure; if your tribe isn't growing fast enough you can try a different blogging strategy, and even if your book doesn't make the bestseller list it still grows your tribe and makes it easier for your second book to become a bestseller. But the barrier to entry is still quite large because building a following sufficiently big is more work than most people are willing to do. Ramit Sethi did exactly this a couple months ago, and IIRC it took him ~18 months and thousands of hours. Huge corporations are never going to pay Ramit millions of dollars to teach them about personal finance, but it's easy to see how he could be making tons of money if he'd instead built an asset designed for that.

You have a good point that there are some advantages to Loopt's strategy. But even still, if you have the choice of starting any business in the world, why start one where you have to put up with that? Is the benefit of a higher barrier to entry really worth the risk it will fail entirely? Sure they have massive upside, but there are lots of other business with massive upside where you don't have to hope for a miracle.

You have to compare Ramit Sethi to the many people trying to do this and failing. Very few people take on Loopt, because you have to accomplish so much to go from 100% odds of failure to 99%. But in Sethi's case, every marginal action -- writing a post, writing a comment, tweaking your layout, etc. -- can get you closer. This means that someone who wants to compete with Sethi can either be more talented (not something you can factor into the "Follow these simple but difficult steps..." analysis) or work marginally harder. Either way, he's stuck in the position of constantly having to compete to be a bit better than the next guy -- and everyone else gets to know that to be the next Sethi, they've just got to work harder than the current one.

It's like the steel business versus the soft drink business. It's really hard to succeed in soft drinks; if you're not Coke or Pepsi, you're kind of screwed. In steel, anyone can compete. Steel is just steel, so if you make a little more, or make it for a little less, nobody cares who you are or how long you've been in business. The steel business chews up capital with very low annual returns. For every dollar of tangible assets, Coca-Cola brings in $.75 in profit every year.

IIRC though it's actually getting easier to make the best seller list over time. The reason for this is that before Amazon and computers, being on the best seller list meant getting your book on the table in front of the door and next to the cash register in all the bookstores. This is no longer the case, because most books are sold by a handful of chains, and they don't do their laydowns based on the best seller lists but rather based on computer algorithms and deals with publishers. In B&N making the best seller list still gets you a discount and onto a special shelf, but it's still less good than getting onto the front table.

Because of this the only people with a big incentive to game the list anymore are people who want to use the credential to use consulting, so there is a lot less competition than there used to be. Of course new authors still try to game the list all the time for ego, but usually they do it half-heartedly so if you really have a permission asset in place and a good strategy its not that hard.