The Startup Law of Comparative Advantage

David Ricardo’s economic Law of Comparative Advantage says that two parties can both gain if, in the absence of trade, they have different relative costs for producing the same goods. VC Jeffrey Bussgang writes that too often, entrepreneurs ignore this law and spend their time on the wrong things:

Unfortunately, I see too many founders ignoring the entrepreneurial corollary to this law, the Start-Up Law of Comparative Advantage. I’m no David Ricardo, but it seems to me that if entrepreneurs followed this “law”, the gains to their start-ups would be akin to the gains attributed to free trade. Here’s why: founders are typically gifted, multi-talented, versatile professionals. As such, they get sucked into spending time doing things that they may be better at than the others in their organization on an absolute basis, but that, comparatively speaking, they are worse at in relation to the handful of things that they are uniquely suited for.

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