Extortion Companies

HotPotato, a social networking startup, has been bought by Facebook with the purpose of shutting the company down. They have "moved to Facebook" but have deleted all their data. The HotPotato company writes that this "was a difficult decision."

I doubt it. They started with 1.2 million in investments and will sell for 10 million. This is all in one year--a good return. What is difficult is the emergence of "extortion companies", companies that introduce a competitive parallel technology and threaten a major company's market so the major company simply takes the upstart over and doesn't use it or its technology. Or it may develop an advantagous innovation which creates a problem for competitors but is not worth the cost of adoption.

A tenet in free economies is the willingness of the economic community to test itself and each other, to allow innovation to force change upon established leaders--or to disrupt them.--so that products and processes improve. The creation of companies for the sole purpose of annoying existing successful entities or buying emerging companies with an advantage for the sole purpose of dismantling them is a perversion of both sides of the competitive equation.