Fuck you, Adam Smith. Demand-driven economy is here.
“The world is nothing but change. Our life is only perception.”
- Marcus Aurelius
Look at this guy. Look like he is half-smiling, looking somewhere in the distance, posing for a good picture. I bet he thinks he’s cool. Well, now he is obsolete.
Welcome to the new world: the world of abundance, where traditional economic principles don’t quite work. This is the world where nobody is controlling supply (nobody needs to, its abundant), whereas demand is the source of wealth. Those, who learn to control it and sustain it, win. This world is not ‘happening’ in the next decade, it’s happening now, as you read this.
So pay attention.
Consider SEO — search engine optimization. What is it, in essence? People are creating site-maps of their websites to optimize for Google’s catalogue. Everyone wants free, organic, relevant traffic — and SEO does just that. But look further: what did Google create? It made everyone play on its own terms, improving the catalogue while spending 0 minutes and 0 cents.
Why? Because it controls demand.
The same case with the famous fruit company. Its iPhones came out and telecom companies all over the world had to spend billions and billions of dollars rebuilding their ecosystem to fit Apple’s standards. No more voice, SMS, MMS, MDMAs (joking) — everyone now wants 4G LTE internet. Apple didn’t spend a dime. Instead of ‘fitting the world’, it made the world come to it.
Why? Because it controls demand.
Bitcoin — the best example of all. Why does it grow? (Or used to, at least)
The answer is simple: because it grows.
People buy when it grows — and when it grows, they buy more. Whereas traditional economic theory tells us that demand creates supply, in today’s world — demand creates more demand.
The former used to be the case in Adam Smith’s scarcity world, where you could open up a grocery store and expect customers to come and be profitable. Why? Because there was not enough supply. With content, IT-platforms and SaaS services supply is infinite and what’s more fascinating — the marginal cost of production (i.e. the cost of having 1 more customer use your service or watch your content) is 0. Just 0, without exceptions.
Google wouldn’t have been able to service every single connected person on the planet if it had even a slight marginal cost. Facebook wouldn’t have been able to allow 2 bln. users around the globe comment cat pics, even if its marginal cost of production was $1. The business plan simply wouldn’t work. You don’t pay anything to have your mom watch your videoblog on YouTube, don’t you? Neither do you really pay of having your neighbor test your new SaaS service. In today’s world, you pay only to attract customers — i.e., cost of acquisition.
Hence, instead of trying to act like it’s still 1950s and trying to control supply, business in the 21 century (and this trend will surely last for a couple more decades) should focus on aggregating demand. Demand is the real asset. And you can actually measure it: in subscribers or user base. Those who learn how to aggregate demand, keep it and control — will win
This is a fundamental shift in economics — and this is exactly why economics of the previous century (hey, Adam, once again) doesn’t work. All those professors will tell you: ‘well, there are broad principles that can be applied everywhere, anywhere, anytime’ — yeah, but what if you have a 0 in the equation? I bet Adam didn’t account for that. He never would have thought that we would be living in the world, where the cost of having 1 more customer in the business is literally 0.
Naval Ravikant twitted that in order to become rich, you need to use leverage. And there are 4 types of leverage in the business realm: capital, labor, code and content.
Capital — is just money. Investors pay you and get a ROI on it.
Labor — well, you can work only 8–14 hours a day, whereas 10 people can work 80–140–10x the time and productivity. But these are the old types of leverage.
The new ones, the types of ‘fresh money’, the new rich, is code and content.
Code — once you finish writing it, you can make literally money while you sleep — simply because it costs nothing to have more users on your platform (except for servers, of course).
Content — allows you to promote and build your brand equity, be known, have subscribers and make a living off of ads. These are the new types of leverage, that take into account the new demand-driven economy
And if you think about it, in the demand-driven economy, there is no competition, either. There is enough for everyone. Demand cannot be depleted. If I create a blog with a paid membership section at $5/month, and attract 1000 readers (note: the world population is 7.5+ billion, so it’s going to be very hard), I’ll be already making $5000 a month in side income. It’s not like we (bloggers) are competing for a 1000 readers.
Even if population doesn’t grow, there will always be demand: for content, for services, etc. — because demand is something innately natural to us, as human beings. We simply always want more. And more. People who compete, live in the old world and have scarcity, zero-sum mindset just don’t get it.
Fuck them. They’ll lose.
Also, in the new demand-driven economy, niche wins. We all used to think that globalization is progress. But if you look closer, everything is becoming decentralized. Because there is unlimited demand to go about, mass-market is not cool anymore. People are different (and, oftentimes, weird) and want everything customizable, personalized, exclusive. Niche companies just need to find and aggregate audience that is right for them.
But how do you aggregate demand? What specific steps do you take and how should you be thinking in today’s changing world? Here is a short-story.
I currently live in Russia and have an interesting client for my video-production business that wants to put a new product on the market. At first, he wanted to create a simple e-commerce website and promote his product through influencers and paid ads — the old way.
But then after consulting with several of them, he decided to change his strategy. Instead of doing focus groups and crafting surveys, he decided to step back and let the market decide, literally. His product is women’s cosmetics and make-up. He said: ‘Why not allow famous make-up influencers decide what the product should be, together with their subscribers?’.
It went even further: he broke the product creation process into 5 steps and is planning to record on video every single one of them and post it on his YouTube channel as a reality-show.
a) Testing demand for his product in real-time — creates something people actually want and need
b) Creating content which, in turn, attracts even more demand for his product!
In short, he understood how to capture and keep demand. Whereas the easiest way for a business to aggregate demand is to solve a problem, with content it’s even easier.
Everyone has crazy passions and desires — something you can talk about for hours. If you like glass sculptures, probably you’ll definitely find 1–10k more people around the globe who share your passion. And at $10 per month in subscription, you’ll be making $10-$100k/month, easily, talking about what you love. If Seth Godin, Mark Manson, Tim Ferriss, Shane Parish can, why can’t you? What you need to do is simply create high-quality content regularly and attract your people. You’ll be amazed by how quickly you can do that. You can actually talk about anything you want — and make money. Sounds cool, huh?
Because I live in Russia, our influencers’ content is limited to a Russian-speaking audience around the world. And it always amazes me, how big and how easy it is to capture audience when you create content in English. Be it YouTube, Medium or any other platform — exposure goes x50, conversion rates skyrocket compared to creating content in Russian. Being global is amazing. That’s one of the reasons I am writing this article in English. (The other being that I think better and faster in English) Realize this.
Demand-driven economy is slowly crawling — and that’s one of the reasons we see the we see a lot of young (and rich) IT-entrepreneurs and influencers on the global market. You need to learn how to aggregate demand, because money follows eyeballs, always. In today’s world, demand is the real asset.
And the good news: there will always be enough for everyone.
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Thanks for reading! Let me know what you thought: