The Gap Theory of Exceptional Success

Mid-gap, Midjourney

In finance, it's called arbitrage. In Econ 101, it's economic profit. For infosec researchers and black hats, they're zero-days. For the purposes of this post, let's call them gaps.

Each of us have some understanding of The System or systems in which we live. We have a sense of what ends are achievable given our means and the systems' internal logic.

Probably all of us overestimate the logic of those systems.

“The System,” whatever that means to you, is patchwork thatchwork: overlapping regulations, norms, and customs that sometimes reinforce, but often undermine and contradict each other. Between the mislaid reeds and rushes are pockets of space that sun, rain, and ambitious people can squeeze through.

Neither natural selection nor intelligent design

Gaps form because there is no intelligent designer. This fact is disappointing to both conspiracy theorists and people who wish the systems that govern their lives worked better. Even the most internally consistent code of laws becomes diluted through interaction effects to the point of inscrutability — “no plan ever survived first contact with the enemy,” and “everyone has a plan until they get punched in the mouth,” et cetera.

The System is also not a product of anything as ruthless or elegant as natural selection. With our biological imperatives abstracted away to a fare-thee-well, our systems operate apart from the existential pressures that molded us from primordial ooze into the planet’s dominant species.

Even relatively simple systems, like the one for determining who at your company gets promoted, are rife with inconsistencies and misaligned incentives.

So, over time, gaps emerge.

And the theory is this: remarkable, generational success comes from finding those gaps and exploiting them in an elegant way.

From overhead to underfoot

Shifting the guiding metaphor from overhead to underfoot, gap-attuned people understand that we live on tectonic plates, figuratively as well as literally. Their worlds undergo constant change, usually so slow as to be nigh imperceptible, sometimes so violent that it levels cities (yes, I live in a fault zone).

Earthquake-level events create new opportunities because they suddenly create big gaps. Covid, AI, crypto, large dislocations of capital or people — all exposed gaping opportunities for the enterprising among us. In sudden newness, the “edge” of knowledge is suddenly within the reach of a wider swath of the population. Perceived expertise can be cheaply won. Investors start looking for people to lead them and their AUM into the breach. The world rushes in. But taking advantage takes an elegant approach.

The importance of elegance

Elegance* plays a role in both the finding and the exploiting.

Career-making gaps can’t be too obvious. If gaps were easy to find or obviously exploitable, everyone would be doing it, and they’d cease to be gaps.

Once you’ve found a gap, in order to exploit it, you have to close the door behind you. There must be a reason or at least a story about why only you deserve to mine that particular lode. In StartupLand, for example, and to introduce yet another tortured metaphor, we raise the drawbridge, lower the portcullis, and congratulate ourselves on our well-built moats. You don’t need a moat if no one knows where you live. But once you’ve built a castle and started taxing the local peasants, word will spread.

Identified gaps attract attention. Economic profit trends to zero because profit begets competition, arbitrageurs bring prices back into harmony through high-volume trades, and zero-days get patched. Systems with long life spans have at least some self-correcting mechanisms to prevent the gap cycle from turning vicious.**

Widespread knowledge of persistent gaps is destabilizing because it reflects poorly on The System. If those inside the System feel others have gained by not following the rules, they are less likely to follow the rules themselves. When people lose faith in The System, their behavior can become unpredictable. Rather than reliably responding to face-value carrots and sticks…

…they start looking for gaps.

Notes

*I think elegance is at least partially in the eye of the beholder and often reveals itself only in hindsight. Did Adam Neumann elegantly build a successful co-working business? Looks like no. Did he elegantly use his reality-distortion-field brand of charisma to separate SoftBank from billions of dollars and hold onto a billion for himself? Yes, he did. Did Netflix’s pivot from mailing physical disks to streaming elegantly take advantage of the growth in internet bandwidth? An inspired move; the epitome of elegance! Could it have all gone very wrong at a number of junctures? Of course!

**I think we all at some level believe, because the alternative is so disturbing, that the really important systems are self-correcting. Sure, the world is heating up, but as climate costs rise, so too will the incentive to address the problem, and we'll toss up some satellite mirrors up into orbit to reflect sun back into space (or something). Sure, increasing levels of microplastics are found in tuna and newborn humans and the containers we use to microwave their milk, but some scientists in Japan have developed some plastic-eating bacteria! (I actually remember hearing the bacteria story on the radio years ago, and unironically thinking "Oh good, we're saved!” Because I want to believe that the universe trends toward “it’s all going to be alright.” The accepted theory is that it actually trends toward entropy, or more colloquially, gradual decline into disorder.)