It is useful to remember that the market is an abstraction of aggregated transactions. The basic supply and demand graphs they teach us in early econ rely on two assumptions: rational agents, and perfect information.
I expect the imperfect information problem dominates in cases of new products, because producers have a hard time estimating return, and customers don’t even know it exists. VCs are largely about developing a marginal information advantage in this space. Interestingly, all of the VCs I have personally interacted with (sample size: 5) say they pick teams over ideas.
When the people at Thinx were asked why the dominant companies hadn’t done it already, what was their answer? If they couldn’t answer, that would indicate to the VC the team didn’t gather enough information to justify their claims (and thus were unprepared). I would expect the answer is some combination of competing with their own products, and demand is not big enough to be profitable with their scaled manufacturing methods.
On the subject of Tums: what is the socially optimal point for sugar-free Tums? How do we know the socially optimal outcome isn’t regular Tums and mouthwash?
This looks like an information problem.
It is useful to remember that the market is an abstraction of aggregated transactions. The basic supply and demand graphs they teach us in early econ rely on two assumptions: rational agents, and perfect information.
I expect the imperfect information problem dominates in cases of new products, because producers have a hard time estimating return, and customers don’t even know it exists. VCs are largely about developing a marginal information advantage in this space. Interestingly, all of the VCs I have personally interacted with (sample size: 5) say they pick teams over ideas.
When the people at Thinx were asked why the dominant companies hadn’t done it already, what was their answer? If they couldn’t answer, that would indicate to the VC the team didn’t gather enough information to justify their claims (and thus were unprepared). I would expect the answer is some combination of competing with their own products, and demand is not big enough to be profitable with their scaled manufacturing methods.
On the subject of Tums: what is the socially optimal point for sugar-free Tums? How do we know the socially optimal outcome isn’t regular Tums and mouthwash?