have been thinking about this tweet wrt building business in AI age
at their hearts, more businesses than we realize are marketplaces with network effects + super fractal-y domain knowledge
1. some interesting marketplace businesses that are not obviously marketplaces
- banks like jpmorgan -- the og marketplaces matching debtors with creditors
- costco - matching wholesalers with consumers
- palantir - matching talented engineers with crusty f500s
in all of these cases, both sides of the market fed eachother, and there was a real network effect, if you squint
2. fractal-y domain knowledge -- people always look for "moats" and sometimes there are moats but many times, the moat is just caring a lot and working hard -- this is how you discover the very niche things of doing things in ways that impress and retain your customers and make the right tiny investments along the way to keep doing this every day until the end of time
this is most apparent in service businesses (law, banking, consulting, adverstising) because you can really dig deepto find scrappy alpha.
as a thought exercise, think about how an investment bank takes ant or spacex public. 1000s of tiny things that go very very right down to press releases, filling the orderbook, selling without desperation, etc. that institutional knowledge is incredibly diffuse and is what makes a great firm
i think as AI automates the paperwork, this diffuse ability to get the job done will be the only thing left to pay for
at their hearts, more businesses than we realize are marketplaces with network effects + super fractal-y domain knowledge
1. some interesting marketplace businesses that are not obviously marketplaces
- banks like jpmorgan -- the og marketplaces matching debtors with creditors
- costco - matching wholesalers with consumers
- palantir - matching talented engineers with crusty f500s
in all of these cases, both sides of the market fed eachother, and there was a real network effect, if you squint
2. fractal-y domain knowledge -- people always look for "moats" and sometimes there are moats but many times, the moat is just caring a lot and working hard -- this is how you discover the very niche things of doing things in ways that impress and retain your customers and make the right tiny investments along the way to keep doing this every day until the end of time
this is most apparent in service businesses (law, banking, consulting, adverstising) because you can really dig deepto find scrappy alpha.
as a thought exercise, think about how an investment bank takes ant or spacex public. 1000s of tiny things that go very very right down to press releases, filling the orderbook, selling without desperation, etc. that institutional knowledge is incredibly diffuse and is what makes a great firm
i think as AI automates the paperwork, this diffuse ability to get the job done will be the only thing left to pay for
if you're into "financial models", pivot to ontologies. You need to think about firms as networks of complementary knowledge and know-how, not as a bunch of numbers on a spreadsheet. Accounting doesn't give you any view into the thing that actually matters (and will matter more and more going forward): how intangibles combine to create economic value.View quoted post on X
Firms with economically valuable configurations of knowledge / know-how can deploy capital at attractive returns. Those with a differentiated ability to learn from deployment (accrue more economically valuable knowledge/know-how) absorb more capital over time.
Organisms / species with adaptive mutations absorb energy at high rates and use that energy more efficiently (become more selectively adaptive).
Are you getting it now?
