App Developers Are A Lot Like Drug Dealers, Says The Harvard Business Review

A brutal column in the Harvard Business Review compares youthful app developers who drop out of school to pursue their venture-capital funded dreams to the pitiful drug dealers of the famous "Freakonomics" essay on the economics of urban crime.

Statistically, app developers have almost no chance of making it rich, Jerry Davis writes, using the deliberately provocative title, "Why Do App Developers Still Live with Their Moms?" Davis is a professor at the Ross School of Business.

The app ecosystem is a "winner take all" field in which a tiny handful see great success but the vast majority of the country's 275,000 registered app developers will see naught but crumbs. (Most people download just a few of those apps, and people tend to download the same apps as each other - Candy Crush, Google Maps, etc. The rest get ignored.)

But because a few make it rich, everyone else believes they have a chance of succeeding also. So the field fills up with economic losers who are only dimly aware that their chances of creating a hit - and actually coming out ahead, financially - are thousands to one against.

The market is structured in a similar way to the illegal drug trade, Davis argues, citing the Freakonomics essay, "Why Do Drug Dealers Still Live with Their Moms?," by Steven Levitt and Stephen Dubner. That article described the way young men in poor neighborhoods begin dealing drugs because they believe it will lead to gangsta-level riches. In fact, the hours are so long, the profits so low, and the risks so high that only the high-level dealers at the top of the pyramid come out ahead. The majority of street-corner dealers can't even afford their own apartments.

Here are some sobering statistics about the likelihood of success in app development, according to Davis:

• With about 1,400 net hires per year, getting a job at Facebook is only slightly more likely than getting drafted into the NFL.
• The combined global workforces of Groupon, Facebook, LinkedIn, Zynga, Yelp, Pandora, and Zillow is smaller than the number that Circuit City fired in January 2009 when it was liquidated.
• [In a survey of every company that did an IPO in the U.S. since 2000,] even the best-known employers of knowledge workers often have fewer people than a local car dealer or Walmart store. For instance, real estate site Zillow has 812 employees, and travel site Kayak has only 205.

Davis' advice? Stay in school, and get a proper degree.