Please take my money: The case for value capture
Ingenuism Weekly 41
“Builders need to be built. Builders aren’t born. No one becomes a builder by default. Becoming the kind of person who can and does regularly engage in building is a profound achievement.” –Gena Gorlin
The moral foundations of progress - Silicon Valley Examined 30
In this episode of the Silicon Valley Examined podcast, Don Watkins and Yaron Brook discuss the moral foundations of progress and what philosophic commitments a progress movement would have to share.
Please take my money: The case for value capture
Robert Hendershott and Don Watkins
Wikipedia’s contributors have created an enormous amount of value for its millions (billions?) of readers. They have also been extraordinarily bad at capturing value for themselves. They’re paid nothing!
On the face of it, that sounds like a good thing for the world. The less value a producer captures in the form of profits, the more value that’s left for everyone else, right?
Not really. Value capture turns out to play a crucial role in value creation. Or, rather, it plays at least three key roles:
(1) Information/feedback. Value creation is hard to observe; value capture is easy to observe. Value capture reliably (albeit not perfectly) implies there is value creation. If you are giving something away, it is hard to know how much customers value it. This makes it really hard to engage in exploration since you’ll struggle to discover whether you’ve actually created value.
(2) Resource allocation for future progress. If organizations capture part of the value they create, additional resources for future value creation accrue to organizations with past success. Apple ends up with plenty of resources to innovate; Nokia not so much. A similar dynamic drives access to the seed capital that launches the value creation process – entrepreneurs like Steve Jobs are more likely to acquire the initial resources to create companies like Apple because the investors making these choices tend to be the investors who have made good choices (and captured value) with their past investments.
(3) Incentives. This is a tired story, but it’s true—not just for founders but for everyone in the start-up ecosystem. Working for a start-up means accepting below-market pay for above-market effort and no job security. Some people will do this for passion. More will do it for passion and a chance to get rich.
Value creation enables value capture, which in turn empowers value creation. This virtuous cycle has taken human beings from subsistence living to unprecedented abundance.
That’s one reason we’ve spent the last few weeks writing about business models—that is, the organization-customer relationship. Effective business models make a key contribution to progress, in part through their contribution to value capture.
The key components of a business model are:
The structure of customer relationships (includes pricing) — how value is created and delivered
Operating cost structures — the resources needed to create and deliver the value
Customer acquisition costs — the resources needed to connect the organization to the customer
All organizations that create value have a business model. The organization does not have to be a for-profit firm: think of Wikipedia, which has annual donations surpassing $100 million. And some organizations do not create value, they transfer value: think any government. These do not have a business model (although they may still capture value).
Network business models, stealth business models, long-tail business models, viral business models, and blended business models are behind the most successful companies in the 21st century—the companies best at creating and capturing value.
And they don’t just make founders rich—they make all of us rich.
What’s old is new
One of my stock illustrations of our culture’s declining enthusiasm toward progress is the disappearance of the World’s Fair. The World’s Fair was an international exhibition that highlighted the cutting edge of human progress and celebrated human achievement. The last one of note happened in 1984 and was so uninspiring that it ended in bankruptcy.
Good news: one group is trying to bring it back.
[W]e must look to the past — to the World's Fairs — to build the future. By stepping out of the virtual world and into the physical one, we can literally create common ground for the people of the world to discuss nuance, and channel their focus — at scale.
Through compelling pavilions and exhibits, awe-inspiring art and architecture, and incredibly immersive experiences, we can design a physical space where everyone can feel, touch, and see the future. We can take advantage of our existing digital infrastructure and the latest virtualization technologies to deliver a complementary experience that spreads the future to billions of people, allowing voices from all walks of life to participate in the conversation. We can build a new World's Stage — the intellectual equivalent of the Olympics — where heroes and role models are created, where dreams are born, and where we celebrate achievement over superficial influence. We can build a new medium that keeps us pointed towards a North Star: helping us find our next great step, focus on it, and celebrate its achievement together.
You can find out how to get involved here.
You say utopia, I say protopia
Or, anyway, that’s what Kevin Kelly says. Check out this great interview of Wired founder Kevin Kelly by James Pethokoukis on optimism, innovation, and how we can fuel progress going forward.
Utopians and pollyannians believe in a harmonious destination without problems. Real optimism requires problems, and there is no endpoint; it is an eternal process of becoming. It is through the process of endless problems that we gain progress. An optimist aims for a tiny bit of progress, a world that is a tiny bit better this year than last year, even though this new world will have major new problems. So I am optimistic because we can keep creating options for good even as we create new troubles.
In the end, optimism is a type of imagination. You imagine a plausible future you want; then you imagine how you might arrive there, what kind of problems will assist you, and the kind of processes you need to keep going. It never ends in utopia. I call this type of optimism, protopia. “Pro” as in progress, proceeding, and the affirmative pro, as in pro vs con. Protopia is what has gotten us here today in 2022. Since you can’t make any kind of complicated good unless you first imagine it, in the long run, it is imaginative optimists who shape the future.
Full interview here.
Do you believe in miracles?
Nature reports that AI technology and paired with epidural electric stimulation have enabled three men fully paralyzed from the waist down to move.
Within a single day, activity-specific stimulation programs enabled these three individuals to stand, walk, cycle, swim and control trunk movements. Neurorehabilitation mediated sufficient improvement to restore these activities in community settings, opening a realistic path to support everyday mobility with EES in people with SCI.
The only question I have is why this isn’t front page news. Is that we are blind to good news—or that progress is happening so rapidly that this breakthrough barely registers?
In Ayn Rand’s novel Atlas Shrugged, one of the protagonists invents a revolutionary metal that’s stronger and lighter that steel. Looks like that may have actually happened, albeit with a polymer rather than a metal.
MIT researchers have developed a new material that's as strong as steel but as light as plastic.
It can be easily manufactured in large quantities, and the use cases range from lightweight coatings for cars and phones to building blocks for massive structures such as bridges, according to Michael Strano, the Carbon P. Dubbs Professor of Chemical Engineering at MIT and the senior author of a new study.
Let’s hope this material gets a better reception than Rearden Metal did.
How to build the builders
Psychologist Gena Gorlin just launched a Substack that offers psychological advice to entrepreneurs and other creators.
One of the most heartening cultural developments spurred by COVID-19 has been the rising awareness of our urgent need to build, and with it a bipartisan “progress movement” aimed at studying, financing, and valorizing the builders. These efforts have gained momentum in recent months, with the announcement of a new Institute for Progress and a widely circulated Atlantic article calling for an abundance agenda. With this resurgence of intellectual and economic support for the builders, the time is ripe to develop the moral and psychological supports that builders need in order to grow and thrive.
Builders need to be built. Builders aren’t born. No one becomes a builder by default. Becoming the kind of person who can and does regularly engage in building is a profound achievement. This achievement is the chief source of all human abundance and joy; yet, as I suggest here, it is among the least well-understood of all human achievements. And there is currently no credible, comprehensive guidance on how to achieve it.
Well, there wasn’t credible, comprehensive guidance.
Until next time,
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