Play with tools

In today's world of web service APIs, there are a growing number companies directly selling technology. There's an interesting dynamic behind this business model, which I'll summarize as 'solve an technically challenging problem, then rent the solution'. A great example of this is http://www.simplegeo.com/, they make it easy for application developers to look up business near a specific physical location. I imagine this will be incredibly useful to anyone building applications for GPS enabled phones.

These tool makers can leave opportunity on the table. Two precedents come to mind: Youtube.com and Mint.com. The former leveraged flash video technology from Adobe to create an easy to use video sharing site, and the latter leveraged financial aggregation technology from Junglee to build an easy way to manage your finances in one place.

The harsh reality is that inventors don't always apply the knowledge/creativity/determination necessary to discover markets for their creations. They end up selling the technology directly, a model that lacks creativity but is likely a safe bet for moderate success. The downside is that the sellers can grossly under price the product. An enterprising third party can swoop the majority of the value.

I wonder if inventors will figure this out. Perhaps someday they'll spend more effort applying their technology before selling it. In the mean time, I consider this 'technology for sale' to be one of the biggest arbitrage opportunities around.