Building in public forces true competitive advantage


What would happen if I forced you to develop all your precious, proprietary, secret-sauce code in a public Github repository?

One thing would be: You would be judged. Your peers would judge you by that code, with a broad definition of “goodness” that includes everything from file and class organization, documentation, tests, avoiding placing API keys in code, eliminating your reliance on “security by obscurity,” and even that artful quality which like the proverbial US Supreme Court definition of pornography is impossible to define but “you know it when you see it.”

In this sense, building in public would force you to create quality, artful code.

The force at work is as simple as it is universal: Ego — your desire to impress others.

That’s a good thing, probably. But what about your business? All your secrets are out, so your competition is empowered and you’re screwed, right?

More generically, if your code is public, nothing you create there represents a technical competitive advantage, because your competitors can also use it. You are therefore forced to build some other competitive advantage into your business. For example, if Etsy open-sourced their entire stack, would that make it easy for a competitor to overtake Etsy? No, because Etsy has built a marketplace; the presence of buyers and sellers is their primary asset. Now that Facebook has open-sourced their entire data center infrastructure, does that make it easy for a competitor to overtake Facebook as a social network? No. The value in these companies cannot be replicated with money, which is exactly why those companies are valuable.

A technical competitive advantage can be permanent in select cases, like Google (who continued to innovate at a rapid pace so that no one caught up) or for whomever finally cracks the code for in-neighborhood self-driving cars. But this condition is rare; typically a technical advantage is a fleeting advantage, because most technical things can be replicated. In fact, they’re often replicated more quickly and cheaply than their original inventors, as proved by observing that “first to market” often doesn’t equate to “winning the market.”

Thus, building in public forces you to create permanent competitive advantages. 

What about personal secrets instead of technical secrets?

If you publish the salary formula for everyone at your company, you no can longer compete for talent on the sole basis of compensation. You can’t kick in an extra $10k/year to win a critical employee with especially germane experience. This forces you to build a company where great talent wants to work despite lesser remuneration. There are many frameworks that guide you in constructing such an environment, but in general it more or less boils down to Autonomy (i.e. freedom to explore, the control and empowerment to invent solutions to problems, and to prove the quality of those solutions through implementation, in exchange for accountability for the result), Growth (i.e. working on interesting puzzles, whether personal or professional, along a fulfilling journey), and Purpose (i.e. why should this company exist? Why is it worthwhile to bust ass to see it thrive, the culture, the values, the joy of working with others whom you generally like and respect).

Thus, building in public forces you to create a company with exceptional culture and an organization of empowerment and purpose.

Both of these things — constructing a permanent competitive advantage (not “secrets in software,”) and creating a company culture that attracts and retains top talent for reasons beyond monetary bribery — are critical ingredients for creating durable tech companies whose growth and brand are unhindered by the onslaught of well-funded, hard-working, intelligent upstarts that inevitably join any market big enough to be interesting.

By building everything in public, you’re forced to do “what’s most valuable” as well as “what isn’t easily copyable,” whether that means the quality of your workmanship, the fortress of your business model, or a talent magnet.

It’s still possible, and occasionally advisable, to operate in secret. But sunlight isn’t just the best disinfectant, it’s the best way to forge durability.

  • Excellent article as always Jason, really enjoy your entrepreneurial insights and advice.

  • Love this one Jason. Secrets in business are often the sign of a closed mind. For most entrepreneurs they form a barrier rather than conveying an advantage.

  • Art Veal

    Great insight! I never thought about it this way but I was just looking at what factors make us defensible and based on this, the hardest part (getting customers for a marketplace) makes the best defense. Excellent! Made me refocus my thinking.