Early-Arriver Arbitrage

Theory #35 | The arena rewards those who arrive early.

In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists. — Eric Hoffer

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I’m not one for giant sporting events or concerts, but I think about arenas a lot. Every kind of game happens in an arena and every arena hosts some kind of game. 

New arenas are being built all the time. Sometimes people know they’re coming. Other times, there’s no warning. Regardless, arenas tend to reward those who arrive early. 

Why? Because inside every new arena hides an arbitrage opportunity. And the more extreme the arena, the more extreme the early-arriver arbitrage tends to be.

II

These arenas can be public or private. They can be online or in real life. They can be big or small. They can be professional, social, cultural, or something else. Arenas can be discrete spaces, communities, or even disciplines:

• User-generated content platforms: Instagram, TikTok, Reddit, Substack

• Movements built around new technology: crypto, AI, Apple VisionPro

• Communities based on professional/ lifestyle trends: remote work, nomading

• Emerging cities/ sub-communities: Palo Alto, Silicon Valley, “Cerebral Valley”

• Local establishments: a coffee shop, bookstore, community theater

There are more arenas than I can name or talk about in this short essay, but let me name a few that I will: Twitter. San Francisco (i.e. Silicon Valley). Clubhouse.

Everyone talks about how magical each of these places were in the early days. Some of it I think is just fondness for the cohort with which they first experienced the arena or sheer nostalgia. But a lot of the magic I believe is true and tangible.

There’s a particular vibe when you arrive at an arena early:

There aren’t many people there yet. It doesn’t feel crowded. And hence everyone can talk to everyone else. Talk about what brought you to the arena, about the other arenas you’re in. Maybe even meet the people who built the arena. Ask them questions.

Meanwhile, there are fewer questions about who you are. Less status checking — less thinly-veiled questions trying to gauge your position in some social or professional hierarchy. Less trying to determine where in the arena you should be allowed to sit or who you should be allowed to meet.

Everyone who arrives at an arena early is suspended in a time and space of possibility — and suspended from the usual judgments — for a little bit. And this is when your “surface area of luck” is at its peak.

III

This is how people describe the early days of Twitter. And of tech Twitter. A lot of important and future important people of tech were there. Everyone was experiencing something new together. The crowd hadn’t shown up yet. So what? Well that meant that even the youngest, least experienced, least connected person in tech Twitter could meet the elder, experienced, hyperconnected people with ease. And the reverse too — the latter could meet fresh young minds of the future.

This is the same way people talk about the good ole days of the San Francisco tech scene (circa late 2000s to mid 2010s). The meetups were more meetup-y. The hackathons were more hack-y. The nerds were more nerdy. Everything in the tech scene felt more authentic, more egalitarian, and less sceney. People talk about the serendipitous connections they made with now-famous tech leaders. They talk about the random ways they met their future besties and co-founders.

Fast forward a few years to another time-compressed microcosm of this kind of experience: the early days of Clubhouse. The app was in beta on Testflight with a cap of 10,000 users for the first few months. In this time, so many notable Silicon Valley tech entrepreneurs, investors, and high-profile personalities joined the app and used it constantly. Others, much lower profile yet ambitious people, got invited to the app and found themselves on equal footing to build genuine relationships — to cross pre-existing community and status lines with ease. (I should note that as a very early user and employee, I experienced much of this and tried to help foster it.)

These are by no means the only examples, and they still understate the variety of opportunities that sprouted in the early days of these new arenas. For example, on any social media platform, one of the benefits to showing up early and investing in the arena is that the platform itself is incentivized to help you grow. Many of the biggest creators and influencers on such networks benefit from promotion by the algorithm (or indirectly via engagement with the founders and other notables on-platform), being manually featured, or even getting partnership opportunities.

IV

The potential to find and seize opportunities in new arenas is what I call “early-arriver arbitrage.” And every new arena has unique arbitrage opportunities.

There are many kinds of potential arbitrage: knowledge arbitrage, social network arbitrage, technological arbitrage, cultural or geographical arbitrage, to name a few. And overlaying all of this is simply time arbitrage.

It’s “arbitrage” because there are temporary inefficiencies in new arenas (or systems, situations, contexts — whatever you call them). Most people haven’t spotted the value in the arena yet, so those who have get an advantage. Sometimes the arbitrage opportunity last a few days, a few months, occasionally years.

Since the arena is new and sparsely populated, it’s easier to scale up to being notable or the “expert.” The classic advice that you need to put 10,000 hours into something to master it can all but be thrown out the window in new arenas.

And as I said, one of the benefits to showing up early and eager to any social platform for example is that the platform itself is incentivized to help you grow. The founders and anyone else notable on the app are more likely to engage there than anywhere else.

What are some tangible arbitrage opportunities? They include the following:

• Professional networking. Connections with peers, elders, important figures, or talented up-and-comers in a given domain.

• Friendships. Genuine relationships forged by shared experience and context.

• Mentorship. Guidance from those who got to this or another “arena” earlier.

• Jobs. Tangible professional opportunities such as full-time jobs or projects.

• Insider knowledge. Fast-track to learning about an industry or community.

It’s hard to even state the magnitude of how just the slightest of any of these opportunities could be a life-changing event, professionally or personally. Even being an early patron of a soon-to-be-popular new coffee shop or bookstore in your neighborhood can give you early-arriver arbitrage — you could build relationships with the owners and employees, make friends, even find a partner.

Most people who are early to an arena will reap some of the rewards of these opportunities whether they realize it or not. Those who are more cognizant can actively seek them out and capitalize on them in massive ways. Even more fascinating is that the arena doesn’t have to succeed long-term in order for you to reap benefits now (and potential enduring ones too).

The flipside of early-arriver arbitrage of course is early-arriver risk. 

New arenas are by nature unproven. In order to get the potential benefit, you have to invest time early on without a guarantee of any kind of satisfying return. And new arenas often fail. Even if they don’t, the rules of the game are controlled by someone else. This is a common critique of social media platforms that court creators to invest time in their platform without offering any guarantees in return.

So the truth is you have to have some tolerance for risk to play in new arenas.

You can try to de-risk them by looking for signals about which arenas are likely to reward you, to endure, and to scale. (This is what anyone making early-stage bets as a founder or investor has to do!). In my opinion, the best guides for this are 1) your intuition and 2) people you respect. Don’t be afraid to directly ask the latter for input on which arenas to play in and which suit you best.

V

Maybe this isn’t all that novel an insight, but it’s a lesson I keep learning. So it seems worth turning inside out to extract the marginal extra nugget of wisdom.

There are constantly new arenas being built and constantly new opportunities to play for their arbitrage opportunities. Yet I think people still undervalue new arenas because they fall into a common trap: it’s easy to think you’re already late to an arena even when it’s still so early. A crowd can look big until you see how big it can become; only then do you realize it was actually tiny before.

Even if you’re sure that you’re not early to an arena, there are ways to make the most of it. Scope down the effective size of the arena. Identify a narrower niche that’s aligned with your interest and intent. Then start contributing. Give more than you take. If you stick with it, you’ll still benefit (though it’ll likely be slower and of a smaller magnitude unless you work disproportionately harder). 

The obvious other option is to focus primarily on new arenas. (You can also build your own.) In fact, I think everyone — no matter how connected or successful — should be playing in at least one new arena at all times. The harsh truth is that arenas are never static. If they’re not new, they’re getting old. If they’re not growing, they’re dying. It’s not just opportunistic but also healthy for your mind.

So no matter what kind of arenas you’re in or interested in being in, keep your eyes open. Be aware of new arenas being built. Maybe they’re new technologies, platforms, trends, communities, apps, or just a coffee shop down the street. Find out what games will be played there and the arbitrage opportunities that may pop up. Then decide which ones are worth investing time in. Prioritize. Be picky.

People talk a lot about “surface area of luck” and how to go about increasing it. Not to take the romance out of the word, but “luck” is often just the likely outcome of some kind of arbitrage. One of the best kinds of luck comes from early-arriver arbitrage because you have agency in manifesting it. Make it a point to regularly visit new arenas and you’ll see.

And if you can, get to the arena before the crowd shows up.

What do you see as some of the emerging arenas? Let me know in the comments :)

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P.S. I’ve been indulging in appreciation of thematic art — come along for the ride :)

“Pollice Verso (from Latin: with a turned thumb) is an 1872 painting by French artist Jean-Léon Gérôme, featuring the eponymous Roman gesture directed to the winning gladiator.” — thumbs up for mercy, thumbs down for death.