Unfair competitive advantages don't exist on the web

UPDATE: Here's another good post on this same topic over at
EarlyStageVC

When Ian and I presented about Openomy at the Techdirt Greenhouse this past March, we spoke right after Andy Kessler, an author and successful investor. He was a pretty tough act to follow-- he was a really good speaker and had some pretty interesting things to say. When discussing his invesment philosophy during his talk, he mentioned that when he is evaluating a potential investment in a business, he looks for what he calls an "unfair competitive advantage."

Yes, having an unfair advantage would be excellent, and from an investment point of view, I agree it would be ideal. However, I think its a totally unrealistic expectation, especially when it comes to investments in web applications. The vast majority websites out there are just a product of good ideas, programmer-hours, and good execution. None of these things are a source of a sustainable advantage: any innovative website will spawn many many copy-cats, some of which will be run by people just as talented and motivated as the creators of the original site. This is completely unavoidable. If you honestly believe that no other company can copy or improve on your creation, you are kidding yourself.

Coincidentally enough, the folks at Techdirt did a pretty good job at explaining why insisting on an unfair advantage is silly in a post this past weekend about patents:

[...] in a competitive market there is no such thing as a sustainable competitive advantage. It's a myth -- and a somewhat dangerous one for those who believe in it. Instead, the way to succeed isn't through sustainable competitive advantage, but through continuous innovation -- that is, through a series of fleeting competitive advantages. You don't need patents for that -- just a smart, motivated team and a market to serve.

So what does this mean for people building web applications? Should you be worried that you don't have an "unfair" competitive advantage? I really agree with Mike here: as long as you have a smart, passionate team that is capable of moving quickly enough, I think you will have a fighting chance at success.