To understand why volatility creates exceptional profits, we need to examine the mathematical reality beneath market dynamics. Don't worry—this isn't about complex formulas. It's about simple relationships that most people overlook.
In stable markets, profits tend toward average. Competition has time to emerge. Customers comparison shop carefully. Margins compress as multiple providers offer similar solutions. It's like a poker game where everyone can see each other's cards—advantages are minimal and wins are small.
But volatility changes the math entirely. When conditions shift rapidly:
Information Asymmetry Explodes: Those who recognize changes early gain massive advantages over those still operating on old assumptions. The time gap between recognition and general awareness becomes a profit window.
Speed Premium Emerges: Solutions that might be imperfect but available NOW command premium prices over perfect solutions available later. The value of "good enough today" exceeds "perfect tomorrow."
Network Effects Accelerate: In uncertainty, people cluster around solutions that seem to work. Early movers can capture network effects that would take years to build in stable times.
Option Values Multiply: Every capability, connection, and piece of knowledge becomes an option that might suddenly become valuable. Those with diverse options profit as some inevitably spike in value.
Let's see this in action through Jennifer's story. A graphic designer with modest freelance income, she noticed early in 2020 that her restaurant clients were desperately trying to shift online but had no idea how to present their menus digitally. Traditional design agencies were too slow and expensive for rapid iteration needs.
Jennifer created a simple system: templated but customizable digital menu designs that restaurants could update themselves. Nothing revolutionary in stable times. But in volatile conditions, her speed-to-market solution was worth gold. Restaurants paid premium prices for immediate solutions. She went from five clients to five hundred in three months, capturing value that established agencies couldn't move fast enough to claim.