Thread by @ljin18

New post! How the Passion Economy will disrupt media, education, and countless other industries.

Covering disruption theory, its connections to the Passion Economy, examples of various platforms' disruptive potential, and "why now." 🤓

Thread 👇

li.substack.com/p/how-the-pass…

What's the link between disruption and the Passion Economy?

By creating new products/services that are cheaper & more convenient, providers in the Passion Economy target consumers who couldn't access, or were over-served, by traditional offerings—textbook disruptive potential.

Christensen's disruption theory is ubiquitously referenced yet often misunderstood.

Disruptive innovations don't just make good products better. Rather, they serve lower-profit segments or consumers who previously couldn’t access or afford a product/service (non-consumers).

Because disruptive innovations—enabled by technological change and business model shifts—are seen initially as inferior to existing solutions, incumbents often ignore them and rationally focus on larger, more profitable existing markets.

This asymmetry of motivation often causes well-managed incumbents to fail as disruptive innovations steal away their markets (e.g. smartphones disrupting PCs, video-streaming services disrupting video rental stores).

I extend and relate Christensen's concepts to the Passion Economy:

1) While the original theory of disruption was predicated on competing against non-consumption, I introduce the concept of competing against *non-production*.

The Passion Economy is rooted in workers, and enables people who possess non-commoditized skills to gain economic value from those skills and to become productive.

The Passion Economy converts people’s intangible skills—their knowledge, creativity, etc.—into value.

New platforms in the Passion Economy enable people to earn a livelihood from their individuality—examples include writers on Substack & streamers on Twitch.

Many of these individuals were previously non-producers due to traditional intermediaries & unfavorable business models.

2) The most powerful industry change happens when non-production is matched with non-consumption (e.g. idle cars + latent demand for transportation).

In the Passion Economy, this combo happens when new producers target consumers who previously couldn't access products/services.

By leveraging new platforms and creating new offerings, Passion Economy creators unlock more choices for consumers—including products/services that are cheaper, more convenient, and more aligned to specific interests than incumbents.

This is classic disruption theory!

Here are some examples that illustrate the disruptive potential of Passion Economy platforms:

- Run the World’s online events platform makes it easier and cheaper to organize events, such that new hosts like influencers & non-profits can offer events (non-producers -> producers)

These new online events expand the market to consumers underserved by traditional conferences and enable more convenient, cheaper access to events (previous non-consumers -> consumers).

- New subscription content platforms like Substack and Ghost have the potential to disrupt traditional media co's. They enable more writers to start publishing (non-producers -> producers), and tap into a growing base of users who want more control over their information diets.

For example, a student of tech business strategy may struggle to afford the WSJ and FT, or find it hard to read all the content (non-consume or were over-served).

But $12/mo to @benthompson's Stratechery is more affordable and convenient than the bundled, broader alternatives.

3) A hallmark of disruption is that the basis of competition changes—true of Passion Economy products.

Paid newsletters may be not as good as traditional journalism in terms of breadth or brand, but the basis of competition shifts to curation and trust in a specific writer.

4) On the 'why now', Christensen wrote, “The question is whether there is a novel technology or business model that allows new entrants to move upmarket without emulating the incumbents’ high costs—that is, to follow a disruptive path.”

For the Passion Economy, the catalyst is both tech + business model innovations:

- Tech: Social platforms have connected the world and enabled the rise of a creator class. Advancements including reliable video conferencing make it easier for creators to productize and monetize.

- Business model: Individuals can more easily launch their own businesses by nurturing and monetizing an audience via new digital tools and platforms, with their ventures entailing lower cost structures than incumbents for whom talent was just one of many costs.

A major 'why now' is also the specific moment of history we are living through now: since covid hit, the US unemployment rate has surged to 14.7% in April. This economic uncertainty creates urgency for innovative paths to earn income online—to turn non-producers into producers.

And on the consumer side, non-consumption is manifesting in multiple ways: people without work will increasingly non-consume as they cut discretionary spend.

And many types of services that consumers previously purchased (IRL education, fitness) are now literally non-consumable.

This creates a massive opportunity for new companies to help serve both the huge contingent of non-producers and a growing base of non-consumers.

If you're building something here, I'd love to chat!

There's a million nuances so you should just read the full post! 😅

And if that wasn't enough, part 2 of this series will be in my newsletter next week, detailing the 4 major implications of disruption theory for the Passion Economy.

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A massive thank you to @cliffcmaxwell, formerly Clay Christensen's Chief of Staff and current student at HBS, for his invaluable thought partnership. Our many conversations led to the ideas in this post! I couldn't have written this without him.

Thank you to the talented @bnj and @nbashaw for designing the images in this post.

And thanks to the brilliant @arampell, @nbashaw, @hamishmckenzie, @JasonHitchcock, @julien51, @nealjean1, @eriktorenberg, and @avesegal for reading drafts!