When I think of a wonderland, one key aspect of this place is that companies profit from the value they add (we can even include companies that make money by transferring value) to the world.
They don’t always make the world a better place. For example, an arms company isn’t necessarily improving the world, as most of the time, the weapons are used to kill innocent people. However, it does add value by helping whichever government or terrorist group achieve its political or ideological goals.
Companies that don’t operate on a value-add basis are scams. Yet, perception is reality. If you define success as short-term shareholder value, you don’t need to build a company that creates lasting value. You don’t even need a product. What separates real companies from scams is their commitment to telling the truth—both to themselves and, more importantly, to the world.
Cruise is an interesting example. Had they been truthful in 2016, GM would not have acquired them for $1 billion. It was later revealed that they were losing $5 million daily, a loss now absorbed by GM.
They continue to promise profitability, but the data suggests otherwise, and anyone being honest with themselves knows they will likely never achieve profitability.
Now, Elon promises that L5 is a “few months away” every few months. I’ve told to never bet against Elon, but this one, I’d be willing to take.
Communication is not the vessel of truth; it’s the medium to desirable outcomes.
Since we’ve discussed value-add companies, I believe a useful metric for evaluating a company’s success is value-subtraction. This concept typically works in both directions, measuring the resources allocated to a venture and the number of moats that have been undermined. In its simplest form, it can be expressed as VSP = f(RM), where f is a function that defines how the ratio of moats to resources diminishes value.
Products and companies are often intertwined in people’s minds, and the same is true for many founders, especially in moments fueled by caffeine.
Watch here.
Don’t have a product? It may not matter. You can position the company itself as your product. Hire a team of marketing professionals, create promotional materials, purchase coffee machines, and make TikTok videos showcasing how great your company is. If you lack the funds for a new office, Photoshop will do the trick.
No product? No problem. Hire recruiters to spread the word. As your company grows, the market will see you as the next big thing. After all, it’s logical: you have someone to greet others when they enter the office.
Still no product? At this point, it hardly matters. Sell the idea. Close the deal. You’re not wasting time—other people are. You’re being compensated. Building the product should come after securing sales. The people who are welcomed into the office by your receptionist will eventually build that product for you.
Still no product? You forget easily. The company itself is the product. It’s time for advertising. Have you run any good Instagram ads or TikTok reels? Bought any extensive mailing lists? Are your website heatmaps looking like Europe in the summer?
It’s understandable if you need capital. You’re widely recognized, and people are familiar with you. They knew SBF and Adam Neumann before; now they know you. You are legitimate, and you can always secure additional investment or low-interest credit. People hope you’re the next big thing because they’re addicted to this belief.
It’s a distasteful game to engage in, and, if you’re honest with yourself, it will likely leave you feeling terrible. At best, you might buy a yacht. But Bezos will simply purchase a larger one.