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Product Leverage is Egalitarian.html
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Product Leverage is Egalitarian.html
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<html>
<head>
<link rel="stylesheet" href="styles2.css" />
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<body>
<p>![[Naval-Ep23.mp3]]</p>
<p>The best products tend to be available to everyone</p>
<p>Product leverage is a positive-sum game</p>
<p>
<strong>Naval:</strong> Labor and capital are much less egalitarian, not
just in the inputs, but in their outputs.
</p>
<p>
Let’s say that I need something that humans have to provide like if I want
a massage or if I need someone to cook my food. The more of a human
element there is in providing that service, the less egalitarian it is.
Jeff Bezos probably has much better vacations than most of us because he
has lots of humans running around doing whatever he needs to do.
</p>
<p>
If you look at the output of code and media, Jeff Bezos doesn’t get to
watch better movies and TV than we do. Jeff Bezos doesn’t get to even have
better computing experience. Google doesn’t give him some premium, special
Google account where his searches are better.
</p>
<p>
It’s the nature of code and media output that the same product is
accessible to everybody. It turns into a positive sum game where if Jeff
Bezos is consuming the same product as a thousand other people, that
product is going to be better than the version that Jeff would consume on
his own.
</p>
<p><strong>Status goods are limited to a few people</strong></p>
<p>
Whereas with other products, that’s not true. If you look at something
like buying a Rolex, which is no longer about telling time. It’s a
signaling good. It’s all about showing off, “I have a Rolex.” That’s a
zero sum game.
</p>
<p>
If everybody in the world is wearing a Rolex, then people don’t want to
wear Rolexes anymore because they no longer signal. It’s canceled out the
effect.
</p>
<p>
Rich people do have an advantage in consuming that product. They’ll just
price it up until only they can have Rolexes. Then poor people can’t have
Rolexes and Rolexes resume their signaling value.
</p>
<p>
<strong>The best products tend to be targeted at the middle class</strong>
</p>
<p>
Something like watching Netflix or using Google or using Facebook or
YouTube or even frankly modern day cars. Rich people don’t have better
cars. They just have weirder cars.
</p>
<p>
You can’t drive a Lamborghini on the street at any speed that makes sense
for a Lamborghini, so it’s actually a worse car in the street. It just
turned into a signaling good at that point. Your sweet spot, where you
want to be, is somewhere like a Tesla Model 3 or like a Toyota Corolla
which is an amazing car.
</p>
<p>
A new Toyota Corolla is a really nice car, but because it’s mainstream,
the technology has amortized the cost of production over the largest
number of consumers possible.
</p>
<p>
The best products tend to be at the center, at the sweet spot, the middle
class, rather than being targeted at the upper class.
</p>
<p>
<strong>Creating wealth with product leads to more ethical wealth</strong>
</p>
<p>
I think one of the things that we don’t necessarily appreciate in modern
societies is as the forms of leverage have gone from being human-based,
labor-based and being capital-based to being more product and code and
media-based, that most of the goods and services that we consume are
becoming much more egalitarian in their consumption.
</p>
<p>
Even food is becoming that way. Food is becoming cheap and abundant, at
least in the first world, too much so to our detriment. Jeff Bezos isn’t
necessarily eating better food. He’s just eating different food or he’s
eating food that’s prepared and served theatrically, so it’s almost like
more of again the human element of performance.
</p>
<p>
But the labor element out of food production has gone down massively. The
capital element has gone down massively. Even food production itself has
become more technology-oriented, and so the gap between the haves and the
have-nots is getting smaller.
</p>
<p>
If you care about ethics in wealth creation, it is better to create your
wealth using code and media as leverage because then those products are
equally available to everybody as opposed to trying to create your wealth
through labor or capital.
</p>
<p>
<strong
>You want to use the product that is used by the most people</strong
>
</p>
<p>
What I’m referring to here is scale economies. Technology products and
media products have such amazing scale economies that you always want to
use the product that is used by the most people. The one that’s used by
the most people ends up having the largest budget. There’s no marginal
cost of adding another user, and so with the largest budget, you get the
highest quality.
</p>
<p>
The best TV shows are actually not going to be some obscure ones just made
for a few rich people. They’re going to be the big budget ones, like the
Game of Thrones or the Breaking Bad or Bird Box, where they have massive,
massive budgets. They can just use those budgets to get to a certain
quality level.
</p>
<p>
Then rich people, to be different, they have to fly to Sundance and watch
a documentary. You and I aren’t going to fly to Sundance because that’s
something that bored rich people do to show off. We’re not going to watch
a documentary because most of them just aren’t actually even that good.
</p>
<p>
Again, if you’re wealthy today, for large classes of things, you spend
your money on signaling goods to show other people that you’re wealthy,
then you try and convert them to status. As opposed to actually consuming
the goods for their own sake.
</p>
<p>
<strong>Nivi:</strong> People and capital as a form of leverage have a
negative externality and code and product have a positive externality
attached to them, if I was going to sum up your point.
</p>
<p><strong>Capital and labor are becoming permissionless</strong></p>
<p>
I think that capital and labor are also starting to become a little more
permissionless or at least the permissioning is diffuse because of the
Internet. Instead of labor, we have community now, which is a diffused
form of labor. For example, Mark Zuckerberg has a billion people doing
work for him by using Facebook.
</p>
<p>
Instead of going to raise capital from someone who’s rich, now we have
crowdfunding. You can raise millions and millions of dollars for a
charity, for a health problem or for a business. You can do it all online.
</p>
<p>
Capital and labor are also becoming permissionless, and you don’t need to
necessarily do it the old fashioned way, where you have to go around and
ask people for permission to use their money or their time.
</p>
</body>
</html>