We`ve also heard about one of Nature`s most voracious fish, the piranha. These fish are incredibly hungry and can strip a cow of its flesh in less than 5 minutes.
Why do the piranhas attack so viciously? Are they by nature just really mean fish?
It turns out that in South America, where these fish mostly are found, there are alternating wet and dry seasions. Just like economic cycles, there are times when the rain fills the ponds and lakes, then times when there`s no rain. Ponds and lakes, rivers and streams dry up, and begin to get smaller and smaller.
As a body of water shrinks, the available room to roam, available food, and available oxygen becomes less and less. With increasing pressure to survive, the piranhas, ordinarily just another normal fish, begin to school. At the slightest sign of food, the school will attack.
A market is like a body of water. It can expand or contract, growing or shrinking. That market supports not only customers but also sellers.
It`s all well and good to stand out from the crowd, if the economic pond can support a crowd. When times are good, there`s lots of abundance. There`s plenty of capital, labor, goods, services, and everyone can work their own particular area.
But when times are bad and markets begin to shrink, more and more sellers go after fewer and fewer buyers. Or, conversely, when there are shortages we have more buyers swarming fewer and fewer sellers.
As you consider what sort of business you`d like to start, wouldn`t it make sense to project forward as to the entropy of the market? Is your business going to be in a growing or shrinking field?
If you enter a shrinking field, you certainly can be a purple cow, but how will that impact the surrounding piranhas?