10,000 Clones: The Post-Differentiation Era
Winnable Games in the Post-Differentiation Era
Part-1: Lies We [Still] Call Sales
Prisoner’s Dilemma with Customers
Hidden Cost of Adversarial Design
Where Should Margins Come From?
True Cost of Rent-Seeking
Customers Assume the Worst Intentions
Part-2: Clone on Clones
Myth of The Differentiated Product
Global Labor-Supply
Technology as Deflationary Agent
The Last Moat
Design a Winnable Game
Part-1: Lies We [Still] Call Sales
Prisoner’s Dilemma with Customers
I want to see more companies give away their information advantage over customers. Don’t give away trade secrets, but share what a seasoned customer would already know.
Don’t just share strengths; share the trade-offs. Don’t lie, including lies of omission.
Withholding information is adversarial. We’re in a perpetual prisoner’s dilemma (see below) - we’re stuck in the suboptimal quadrants.
When we don’t share information that the customer should know, that’s exploiting our information advantage. We choose to gain at the expense of the customer. We’re guilty of doing this in multiple company areas, not just sales.
Hidden Cost of Adversarial Design
Products are often built with default settings that might subtly (or explicitly) favor the preferences of the partner company and it is up to the Customer to change it.
These choices are made as early as the design phase, without the customer around to speak up. Examples we see every week include:
Software Bundles: Why can’t I buy just the one I want? Why am I forced to also Buy Things I didn’t want?
Pre-Installed Apps (Phones & TVs). Don’t choose for me. I want the freedom to choose my own apps. I’m never in the market for low-quality apps.
Consent Boxes Pre-Selected. If you opt-in for me, you should get the email spam instead of me.
Affiliate recommendations. Is this an organic recommendation or not? Organic assumed.
Free Trials that auto-convert into subscription payments. These auto-signup paid subscriptions lead to ‘user-error’ -based revenue
This is a type of error-driven revenue that’s manufactured by design. UX figure, Harry Brignull coined the term ‘dark patterns’ – “tricks used that make you do things that you didn't mean to”. I took the 3 screenshots in the appendix from the last subscription I tried to cancel.
Adversarial design patterns have not gone unnoticed by regulators. In fact, a few are now squarely in the crosshairs of new FTC rules.
The FTC’s new “Negative Option Rule” is meant to combat unfair or deceptive recurring billing, where consumers cannot cancel “without undue difficulty.” In a negative option, a customer’s failure to take an affirmative action (e.g., cancel) is permission to be charged.
Where Should Margins Come From?
Inexperienced customers often lack information on prices and alternatives. How should we price when the customer is inexperienced and doesn’t know better? There are two mutually exclusive schools of thought on this:
School 1 / “Personal Responsibility” - everyone is responsible for doing their own research for the prices they pay. If you overpay, it’s your own fault.
Purpose: It’s legal framework, meant to settle questions of liability.
Role of Margin: Margin acts as a reward for withholding information or lying to the customer.
School 2 / “Mispricing as Dysfunction*” - mispricings are a dysfunction of markets. They’re often caused by barriers/unequal access to markets or information.
Key Concern: Healthy markets. Access to markets and information
TLDR: In the long-run, everyone loses in dysfunctional markets (lacking key information). Individuals and the collective are worse off in the long-run.
Margin: Margin attracts & rewards solutions. Attractive margin opportunities motivate other to join in and compete for it, untill that excess margin is competed away.
Price premiums derived from misinformed customers (i.e., information asymmetries) is a form of rent-seeking.
Margin should be earned – it’s the economy’s incentive-mechanism to discover & contribute solutions. Every unit of margin should deliver a corresponding benefit to the market. Transparency reinforces this. Over time, value-adding transactions expand markets and returns, while rent-seeking ultimately collapses, undermining markets and individual rewards.
The True Cost of Rent-Seeking
In economics, rent-seeking describes an individual or entity that seeks to gain without creating benefits to society in return. The activity doesn’t increase productivity, one way or the other. Economists believe this leads to misallocated resources.
Economist, Gordon Tullock coined rent-seeking to illustrate the underestimated social costs. For example, “theft”: individual theft is a pure 1:1 transfer (no social costs), but the existence of theft results in a substantial diversion of resources. Resources are employed to prevent thefts (e.g., alarms and policemen), and successful theft inspires more theft.
Similarly, the existence of unearned margin imposes broad social costs on the system. Direct costs such as legal fees, procurement expenses, due diligence, and regulatory compliance are, in return, are factored into transactions.
This is an example of a “commons dilemma” – people's short-term individual interests are at odds with long-term group interests.
Gordon Tullock,“Welfare Costs of Tariffs, Monopolies & Theft,” 1967Somehow, we’ve convinced ourselves that, within the perimeter of “selling,” the truth is more flexible. Collectively, we act as if there’s a carve-out in expectations, responsibility, and the law. If this takes place on call (or in person), the lie transforms from lying to “selling.”
Customers Assume the Worst Intentions
Customers usually have 2 options: 1) accept the price (and buy) are usually “price takers” (they accept of decline the price). “Price takers” tend to be highly anchored to past prices. Consumers assume any price increases are “unfair” because the old prices were fair. Customers tend to underestimate the effects of inflation on vendor costs. Instead, they attribute price changes to profit-seeking.
When customers lack key they assume the worst motivations for price changes. Skepticism is a natural response — a social cost of unearned margin. False assumptions harm the customer and the vendor. The solution is to educate the customer on why prices are changing. In turn, they will expect the same from competitors, which they aren’t prepared for.
Honesty requires educating the customer on cost structure. There’s an argument to be made for transparency. Buffer (image) shares their price transparency page with historical business expenses.
Honest “Arms race” – Transparency can spark a value-driven arms race (one based on openness). It’s a race not everyone can win or even wants to win. By choosing to compete on honesty, you can outperform large parts of the market simply by playing a game they can't match.
[End of Part 1]
Part II
Part II: Clones on Clones
Myth of The Differentiated Product
Let’s speculate on the future of venture funded tech startups in 3 years. Which of these futures are we more likely to see soon?
Future #1: Product differentiation will be a viable startup strategy.
Future #2: Early-stage, tech startups will attract hundreds of clones (products highly anticipated teams will have thousands)
Think about how rare product differentiation is for companies today. Outside of marketing-speak, it’s extremely rare. In the near future, differentiation will be an ideal. Incoming generations will assume it was always a myth.
Impossible?
Top startups will have clones before they even launch. Hollywood already does this — competing studios race to clone each other as soon as they catch wind of a major script.
Cloning will be a high-volume, automated effort triggered by signals like domain purchases, LinkedIn profile changes, and cookie or fingerprint probabilistic browser tracking.
Some founders uncover a deep insight, compelling them to commit to a direction – clones don’t have to. Instead, thousands of duplicates will attempt to front-run your secret plan. Thousands of clone attempts will eventually guess correctly while simultaneously exploring alternatives you never even considered.
More is more. Simultaneous discovery is their superpower – the power of copy-and-paste economics (or clones economics). They will operate in a world of abundance. Sequential work is old school; parallel work is the future. Conviction will be an irrelevant distraction, replaced with blunt search volume, Monte-Carlo, Markov, & gradient descent.
I’ve always loved the mass-volume approach. I’ve always been on team clones.
How do I know a future like this is coming? This is the logical conclusion of several powerful 100-year trends. Globalization and technology (e.g., Moore’s Law) are both forces that lower barriers to entry. Each time a new population connects to the internet, the labor supply expands.
Global Labor Supply Growth
Currently, the theoretical maximum supply of internet entrepreneurs is capped at 3.6 billion. A third of the world is still not connected to the internet. There are 1.8 billion people sidelined from competing. The UN has set a goal of connecting 100% of the able global labor supply by 2030.
New labor markets, with fundamentally different living standards, can supply a stream of new firms to compete with. As more of the global population connects to the internet, margins will be determined by the lowest standard of living connected online.
Technology as Deflationary Agent
Deflationary cost structures ultimately increase the number of businesses in a given market. AWS scaled and abstracted away fixed server costs. Moore’s Law maintains that the cost of AI will scale more affordably (per unit). Technology’s momentum acts to crumble barriers of entry – i.e., costs, computing, internet, and language.
To bet on progress is a bet on ramping up competitive forces. Progress enables bootstrapped “solopreneurs” to compete with Fortune 500s. Progress enables billions globally. Crowded markets naturally trend toward competing on prices because they converge toward similar offerings; they trend toward becoming lower-priced clones.
Don’t compare future clones with today’s copy-cats. The future includes thousands of clones before you deserve it. They’ll get to market in blazing speed.
CPG brands are no strangers to copy-cats; CPG brands have learned to survive and thrive in spite of substitutes.
The Last Moat:
Visible vs. Invisible Strengths
A crowded market of perfect substitutes drives CPGs to focus on cosmetic differentiation. They aim to win by “appearing” different on the surface, but the tangible product might be indistinguishable. Fundamentally, it’s a difference of optics vs a difference of substance.
In the new world of instant clones, any quality that is visible on the surface will be copied. Logos, color palettes, packaging, messaging, and price points are all visible and, thus, cloneable.
If you want to differentiate from the clones, your superpower needs to be invisible. So, what types of features are valuable plus invisible?
Several strengths fit the bill:
Sub-Team with Unreproducible Concentration of Talent – even if the team is just 3 or 4 people on a niche team. That’s enough to create billions in value in the right circumstances. I’ve experienced this first hand – unknown to outsiders and thus never clones.
Algorithmically-Sophisticated Solutions – algorithms live below the surface. You can speculate, but you can’t see it. This works especially well for US companies: comparing US vs Chinese co’s, Americans tend to assume US firms are dumb & immoral, while the Chinese equivalent has a brilliant algorithm.
Skill-set Arbitrage – apply a valuable hard skill where it’s uncommon. Some problems have been solvable but exist because the skills to solve them are in a different industry. For example, Google has most of the search engineers. But where else are there matching & relevance problems beyond search queries?
Extremes – Methods, Identities, Values – so extreme, others don’t want to clone you. Or they’ll wait for the quality to be table stakes. You can take tactics to an extreme, like, instead of founder-led marketing, hire only influencers and make a big deal about it. Must have 10,000 followers minimum.
Hypothetically, how would a team in Manila determine whether your NYC sales team is winning because of radical honesty?
My theory is that global competitive dynamics (ie, clones) will accelerate the appreciation for honesty because it becomes one of the last surviving unclonable qualities and the antidote to our prisoner’s dilemma. As technology & globalization level the playing field (or open floodgates), differentiation is still possible on the tail-end of values, talent, algorithms, and extremes.
💡 2025: Now that calls & meetings are transcribed, it will change the rewards & penalties for things said. Call/meeting conversations will trend more accurate over-time. Exaggerations will be more rare.
Who's made worse off? Who benefits, by default?
Hypothetically, what version of your company would organically benefit?
Design a Winnable Game
Momentum is a real. (i) Technology seeks to connect us, (ii) information seeks to flow freely, (iii) global specialized markets seek to trade, and (iv) “barriers to entry” want to crumble. These forces, acting together, are nearly unstoppable. Not every game or strategy benefits equally. When the competition consists of 10,000 clones, don’t compete head-on. Instead, sidestep the traffic and lead the clones down a path they can’t win.
Invest in strengths that become more valuable and useful as these forces continue to dominate. Develop a “house view” on what accretes value versus what becomes commoditized. The typical startup assumptions will need to be rewritten – if you missed early mobile and early crypto, this is your window.
Christian P Limon
@cplimon
APPENDIX:
From: Where Should* Margins Come From?
"Should" is emphasized here, but perhaps "ought" is more precise. "Ought" implies a question of ethics or morality. It’s less one-dimensional than we’d prefer. There are degrees along key dimensions. There are interactions. There are minimum social customs, and obligations (to shareholders, colleagues, to self, to our family, etc.
Example: "Does this make me look fat?” The 2 rules: (i) don't lie, (ii) don't be mean.
Most of the time, kindness is the principle of choice vs precisely correct.
And then there’s time: weighing actions and outcomes across different horizons. What do we owe the future? Those not yet born?
— —
An example of a real cancellation process:
Screen 1: “Manage subscription” page. Notice the prominent upgrade buttons. Try to find the “unsubscribe” button.
Screen 2 –same page, but scrolled down.
Screen 3: option to pause or cancel. I’ve accidentally hit “pause.” If you’re a customer who’s been trying to cancel, do you feel like this experience is helping you or hoping to deceive you?
Hiding cancellation buttons will surely reduce churn for now, but over time, UX debt might add up and surface as bad reviews or higher marketing costs long-term. On a long enough timeline, the cost of accumulated dissatisfaction comes due.
I LOVE that you just used the prisoner's dilemma with customers - great analogy!