Wednesday, January 13, 2010

A business model based on technological escalation

I've been thinking about technological escalation, or a situation in which two agents in conflict improve their own technology in order to win. Think about police radar and radar detection units employed by drivers, or caller ID used by homeowners and ID blocking used by telemarketers. I read about an admissions officer at an Ivy League college who started her own consulting practice for teenagers (actually, their parents) who want inside information on admission criteria for Ivy League schools. You get the picture.

Some people seem to build their entire business model around supplying the latest and greatest technology to both sides of the conflict, e.g., black hat hackers who change into white hats when trying to get security consulting gigs with e-commerce companies.

I've been wondering whether technological escalation could be developed as an explicit business model. That is, you could look for conflict situations and ethically develop a series of products that sells to both sides. As long as you keep developing products that help one side or the other get an advantage, you're in business. More formally, you create a market that is modeled by the iterated Prisoner's Dilemma, and make sure that Nash equilibrium doesn't occur for very long.

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