Community (talent & users) is the new scarcity.
How did we get here?
Old conversations w/ @Alex_Danco elucidated some ideas I wanted to summarize here
(Subscribe to his work at scarcity.substack.com)
How did we get here?
Old conversations w/ @Alex_Danco elucidated some ideas I wanted to summarize here
(Subscribe to his work at scarcity.substack.com)
The only way we used to get innovation was by
financing projects w investor $
We could only do that unless there was a bubble, b/c otherwise it was irrational
It was “push” innovation—investors push tech into existence
Now users & abstractions “pull” abundance into existence
financing projects w investor $
We could only do that unless there was a bubble, b/c otherwise it was irrational
It was “push” innovation—investors push tech into existence
Now users & abstractions “pull” abundance into existence
Software changes things — as method of abstraction and a way of building networks
Remember: Hardware does all the work. Software is just this ephemeral layer that sits on top of computers
Uber and Lyft is this layer that sits on top of the cars & drivers that take you places
Remember: Hardware does all the work. Software is just this ephemeral layer that sits on top of computers
Uber and Lyft is this layer that sits on top of the cars & drivers that take you places
The pro of this is abstraction: you get more users more user-friendliness more total jobs being done.
The con: it's less efficient and it breaks.
Ironically, we keep getting better technology and yet it keeps breaking.
How? Customers & user demand creates the pull.
The con: it's less efficient and it breaks.
Ironically, we keep getting better technology and yet it keeps breaking.
How? Customers & user demand creates the pull.
Users and customers are creating the demand by forcing the hardware to catch up and to differentiate and specialized to meet these use cases
This explains Moores law--computing power doubles every two years.
This explains Moores law--computing power doubles every two years.
"Moore’s Law wasn’t a natural “law” at all, but rather a virtuous cycle: if you write software that lets a piece of hardware accomplish more things, for more people, more easily, then...
Your customers will get hooked on their new capabilities & then immediately ask for more"
Your customers will get hooked on their new capabilities & then immediately ask for more"
This is a very very different way of doing & funding innovation that is quite distinct from before.
To back up: It used to be
financial capital -> R&D -> production capital -> product -> users and then we would finally see do users want it?
To back up: It used to be
financial capital -> R&D -> production capital -> product -> users and then we would finally see do users want it?
From investors POV, investing was like pushing on a rope.
You're throwing money into this tech uncertainty and market uncertainty and it takes a bubble or some strong outside force like the government actually mobilize enough capital to break through into this new paradigm.
You're throwing money into this tech uncertainty and market uncertainty and it takes a bubble or some strong outside force like the government actually mobilize enough capital to break through into this new paradigm.
Now, we start w/ the user demand, which "pulls" the innovation into existence. This is a great addition.
It's more time to do experiments. It's more time to learn about your users.
It's more time to grow your user base while you're not worrying about profitability yet.
It's more time to do experiments. It's more time to learn about your users.
It's more time to grow your user base while you're not worrying about profitability yet.
Investors in Silicon Valley no longer needed to underwrite based on cost of capital to return on invested capital
Instead, CAC to LTV
What is it cost me to acquire a customer and what is that customer worth to me?
Instead, CAC to LTV
What is it cost me to acquire a customer and what is that customer worth to me?
What used to be scarce was the unit of production.
My ratio of cost of capital to return on capital was how I measured scarcity
It's now its users are what is scarce, measured by CAC to LTV.
My ratio of cost of capital to return on capital was how I measured scarcity
It's now its users are what is scarce, measured by CAC to LTV.
This is aggregation theory:
It's like if you own all the users (e.g Google, FB), you're not going to charge them the exorbitant rent
You're going to charge everybody else who wants to get to those users and sell them goods and services or certain ads or whatever it might be.
It's like if you own all the users (e.g Google, FB), you're not going to charge them the exorbitant rent
You're going to charge everybody else who wants to get to those users and sell them goods and services or certain ads or whatever it might be.
Monopoly businesses used to make money by extorting customers.
Now, monopoly business make money by charging everybody else heinous profits and then passing a lot of savings on to the consumer.
Hence the challenges w/ regulating these businesses, but that's another topic.
Now, monopoly business make money by charging everybody else heinous profits and then passing a lot of savings on to the consumer.
Hence the challenges w/ regulating these businesses, but that's another topic.
Conclusion: Up until recently we knew how to do push innovation, but not pull
We've learned another way to allocate $ into the future, which is this idea of investing in software abstractions that pulls everything else along, moving the scarcity from unit of production to users.
We've learned another way to allocate $ into the future, which is this idea of investing in software abstractions that pulls everything else along, moving the scarcity from unit of production to users.
