July 22, 2019

Dark Patterns Get You To Buy Things You Don't Want

Dark patterns on the web are bad for consumers

Dark patterns, a practice that uses sketchy UX to trick users into making unintended decisions, are nothing new and pollute many e-commerce sites across the net. If you’ve ever booked a flight online, you’ve probably seen callouts informing you that only a few seats were left, a great way to increase your purchasing urgency. Chances are though, the flight is not anywhere near fully booked, and you’ve been suckered into making quick decisions. These UX techniques are becoming even more prevalent, often to the detriment of consumers.

Dark patterns deceive consumers

Dark patterns are a byproduct of proactive and often nefarious human designs. Companies seek to maximize profits by nature and employ many techniques that can legally achieve this end. Web designers leverage their understanding of online habits with behavioral patterns to optimize certain responses. Major tech companies have enlisted the help of behaviorists and gambling experts to redesign apps in the past as a means of increasing engagement. Casinos are regulated entities—apps and online shopping stores are not. However, consumers are none the wiser, often acting upon false stimuli to make brash decisions out of fear of missing out on deals. Many concerned parties are now paying attention.

Regulators are on the prowl

In an environment of heightened scrutiny, regulators are keeping tabs on a wide number of tech companies. Facebook comes to mind as it looks to expand its e-commerce capabilities, especially through payment initiatives like Libra. Regulatory bodies exist to protect consumers from abuses, including dark patterns like those you see across e-commerce websites. One problem remains: how can regulators properly address what is a dark pattern, and what is deemed acceptable? In addition, how can consumers better protect themselves to avoid falling into these traps? This will be a long battle, especially given how slow regulators both pick up on abuses and enact laws.

Result chasing lead to dark patterns

Where do we draw the line between crafty salesmanship and shady user manipulation? Perhaps this is subjective, but dark patterns are a systemic result of bad incentives. E-commerce sites track an array of metrics, though some are more salient than others. You’ll often hear about Gross Merchandise Value (GMV) or Average Order Value (AOV), data-points that all platforms seek to improve. How do sites achieve these targets? Either through cutthroat pricing or dubious techniques, tricking consumers into buying items they either don’t want or need. Companies create urgency by creating false discounts, fake purchases, and fake reviews. In addition, achieving such goals lead to unintended and negative consequences. By selling more stuff, especially stuff we don’t need, we deplete resources in the name of growth. These dark patterns supercharge metrics like GMV and AOV, but subsequently, lead to more long-term problems.

A creative solution?

The ultimate goal is to protect and better inform consumers. There is nothing wrong with optimizing e-commerce stores, so long as the techniques are honest and transparent. Since businesses generally have no incentive to do so, how can consumers fight back? One way would be to simply boycott firms that use such techniques. Consumers can and do band together to make their voices heard—we could expect a similar response if companies keep abusing these processes. In addition, some e-commerce platforms can highlight their sales processes and responsible practices to entice shoppers, reaping the benefits through stronger engagement. Until then, consumers will just need to keep their eyes peeled.

July 1, 2019

The impact of Apple in a post-Jony Ive world

Jony Ive

Jony Ive, the man responsible for some of Apple’s most iconic products, has stepped down from his Chief Design Officer role after nearly 30 years at the firm. He will kick-start a new venture and will retain Apple as one of its core clients. If this sounds like a new way of securing the bag, you’re probably right. All I know is, I’m happy to see him go. Long live the King of recycled designs and white background product intros. It was one hell of a ride.

A Legendary Track Record

Jony Ive is a legend, whether you’d like to admit this or not. His partnership with Jobs has fundamentally re-shaped our understanding of what products should look and feel like, but also why they exist. Apple blossomed through Ive’s subtle design changes, elegant product lines and cutting edge technologies, all neatly packaged into an experience that extends from the shop floor to your pocket. From the Airpods in your ears to the OS on your Mac, Ive and his team have played a major role in shifting perspective away from specs, and closer to our hearts. Simon Sinek boils it down beautifully in his now often-cited TED talk (the irony dawns on me). It’s the reason why no one wanted to use a Microsoft Zune: Ive wanted to build and convey emotion through his work.

Who Will Replace Ive?

That’s a good question. For now, Apple is sticking to the two people currently second in command to advance the work. In addition, Jony Ive will continue to closely collaborate with Apple via his new venture LoveForm, and will likely have oversight over ongoing projects. However, just as many ailing fashion houses turn to exciting designers to revive their soon-to-be-defunct companies, so too will Apple to maintain any relevance going forward. As technology progresses, Apple has continually regressed, offering up the same tired designs, almost laughably so. For every release, consumers expect a slightly thinner, more powerful phone. There is much fanfare, but limited innovation at every new launch. Consumers are beginning to shift away, in part due to the price-tag-to-innovation ratio which has become completely unjustifiable.

Diversity Breeds Success

Taking a step back, we must remember that Apple is trying to diversify its revenue streams. We noted how Apple News + will probably kill journalism, and why Apple is shifting towards services altogether. Ive leaving could in part be a reflection of this. Having conquered every mountain, he may seek greener creative pastures elsewhere. Maybe this was a great time for him to cash out and bow out gracefully as Apple continues to steadily sink. I wouldn’t count Apple out though: this is an opportunity for its rising stars to shape the company’s future. With competitors already surpassing Apple on a range of metrics and products, new blood will mean sparks to reinvigorate the brand. One caveat remains: if Ive is still intimately tied to Apple, perhaps he will never pass the baton. How Apple decides to move forward is up to them.

Turning the Ive Page

Ultimately, Ive’s departure should have likely happened a long time ago. Since Tim Cook’s appointment as CEO, the company has massively rewarded shareholder value, but underwhelmed its consumers. The Airpods and Apple Watch are a far cry from tomorrow’s foldable devices (even if they aren’t ready for prime time yet). Apple no longer excites. Its existing products have been perfected, replicated and copied at more affordable prices by competitors. For wealthy people in the West, Apple is still a bastion of identity, but in developing nations, there is no love for overpriced and underperforming products. If China were to ban Apple during the current trade war, it could spell even more trouble for the Cupertino giant. As such, Ive leaves at an opportune time to recharge, re-establish his vision and hopefully bring more magic to our incredibly monotone, stale product world. I’ll toast to that.

April 18, 2019

Maslow's pyramid of needs never originated from Maslow's work

Maslow pyramid of needs management colnsultants
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Maslow’s (in)famous pyramid of needs is often a focal point for many cultures managers as they think about their workforce and their needs. The psychologist did indeed think through the hierarchy of needs, but he was not responsible for organizing it in those colorful triangles you may have seen before. In fact, a management consultant came up with the design. The twist? It was based on a deep misinterpretation of Maslow’s thoughts and work.

What is Maslow’s Hierarchy of Needs?

Maslow’s Hierarchy of Needs was a theory in psychology conceived in 1943 that featured a multi-step pyramid. It was part of his paper, “A Theory of Human Motivation.”  The pyramid was meant to showcase that for one to “level-up,” they would need to achieve certain goals in their current level to maintain motivation, and ultimately arrive at “self-actualization.”

A brief history of Maslow’s life

Maslow’s life is a bit of an Odyssey in itself. Born to immigrant parents, he grew up in a traditional Jewish household in Brooklyn, NY, and was often bullied. The hatred he encountered led him to psychology as he looked to better understand the source of these feelings. The psychologist had a prodigious mind which helped him attend numerous universities and develop his theories over time. His work primarily focused on human improvement using a new base as opposed to standard Freudian frameworks which were the norm at the time. Prior to his death, he argued that self-actualization (the highest strata of the pyramid) was (wrongly) biological, leaving out certain individuals and communities by design. Ultimately, his work stood the test of time largely because of management’s infatuation with the said framework.

Why it matters

We’ve discussed management techniques in the past, but Maslow’s work truly shaped today’s understanding of work. Charles McDermid, a psychologist at a Wisconsin-based consulting firm, originally created the pyramid based on his misunderstandings. However, this altered the work forever and sent ripple effects we still feel today. Indeed, the pyramid embodies post-war ideologies, especially around individualism, nationalism and capitalism. Purely through its shape, it falsely concludes that we must fulfil each step to move upwards. Likewise, not everyone can reach the apex in this context, creating a highly centralized power structure. This ultimately justifies pay gaps, certain treatment of individuals and mismanagement practices. However, we know from studies (and life itself) that things don’t work that way. People can be self-actualizing at any given point, without having to wait to be at the top of the pyramid. Maslow did little to critique this over time, instead living off-of the misinterpretation.

In the cultural context, Maslow’s hierarchy is also incorrect

Maslow’s Hierarchy of Needs is presented from a “Western perspective.” In Asian and more collectivist societies, they share different motivations that are more community-focused. A redesigned Asian pyramid ultimately ties in with the idea of “face” as a sociological concept. Face entails behaviors and customs that are tied to morality, honor, and authority. To level up to is to increase the amount of “face” you possess.

Tying it back to work and a flat pyramid society

If anything, we are seeing reversing trends across workplaces. Whilst there are still many environments and cultures that are top-heavy, more places are changing, empowering employees at all levels to take more initiatives. As the pyramid flattens out, so too do the ideas associated with the antiquated framework. Younger employees inevitably challenge organizations to improve and offer more than just a paycheck, especially in an environment of constant fear of layoffs. Rather than box people into a simple framework, companies tackle problems holistically instead. This leads to greater job satisfaction, productivity, and dare we say it, self-actualisation.

April 11, 2019

Performance-infused fashion: the next frontier for fashion

techwear fashion merging together

Performance-infused fashion is heating up in a big way, mirroring societal values and evolving cultural norms. What was once a strict divide between sportswear and fashion has morphed into a need to merge form and function. While we’ve seen this evolution for quite some time, more and more brands are paying attention, which should worry both sides of the aisle. Will we see sportswear firms buying luxury conglomerates or vice-versa? Will fashion have the upper-hand, or will sportswear dominate instead?

Performance-infused fashion as a social norm

It’s no secret that social norms and associated dress codes are evolving. Even Goldman Sachs (yes, that Goldman Sachs) is changing to become more attractive to prospective employees sick of the suit and tie. We’ve become comfortable in ditching old norms in favor of performance and comfort. Sneakers at high-end restaurants have become benign, along with armies of yoga pants in sprawling metropolises. This indicates that we expect greater functionality and performance from our daily wear, especially as we do more than just commute and go to the office. Just as Apple successfully merged performance and design for computing, so too will tomorrow’s fashion greatest players through the potential avenue of performance-infused.

The nomenclature

As is the case with streetwear, there can be a bit of confusion around different categories. Athleisure, generally embodies a sense of performance but falls more on the casual and sport side. Likewise, #techwear, pushes itself to the extremes of performance thanks to the likes of Errolson Hugh’s Acronym. Nestled somewhere in between is performance-infused fashion that isn’t aiming to create a new aesthetic. It’s merely trying to incorporate some of the convenience and added value of performance in fashion. It’s best to look at the types of offerings on a spectrum. If innovative, performance-heavy fashion (like Acronym) is on the far left, then good ol’ regular workout gear can be on the far right. The more aesthetics become a consideration, the further left you go.

Street culture drives innovation

There is arguably no greater cultural force than street culture in the 21st century. It permeates music, entertainment, work, and even religion. Culture acts as a conduit for both performance and fashion as it often balances both intricately. Street culture resonates with passion and a thirst for improvement, especially amongst collectors and aficionados. For example, DJing techniques evolved from street culture as hip-hop continued to gain popularity. We continue to see these world collide at their apex, with designers like Virgil Abloh or Yoon from AMBUSH taking leading roles at some of the world’s most prestigious fashion houses. Their designs, informed by their backgrounds, are often a perfect representation of what performance-infused fashion wants to achieve: form and function. As the culturesphere continues to evolve and move society onwards, so too will innovation around this genre.

The future lies ahead

Technology has become all pervasive in our lives. From swiping left and right across our apps to getting better sleep via smart lights, humans see a constant uptick to improve wellbeing and performance. This, however, can also have nefarious effects over time. We are on an endless treadmill to improve things marginally without taking a step back and understanding tech’s larger impact on our lives. As techware continues forward, how will this endless thirst for perfection genuinely improve our lives over time? Does techware enhance us as humans, or does it drive us into a world where objects cannot simply exist for aesthetic purposes? In addition, how will Design change going forward? Perhaps this is a strong reminder that some of the best things in life simply add value by existing.

April 10, 2019

Digital clothing will become your next go to purchase

digital-clothing-Carlings-3D-model-

Digital clothing is fashion’s next, and potentially very lucrative, frontier. We already spend ample time online, to a point where our digital identities have taken a life of their own.

We now have fully digital celebrities that followers can engage and share with, blurring today’s physical and online worlds altogether. However, digital clothing is no longer limited to 3D renderings as Scandinavian retailer Carlings continues to demonstrate. The company sold digital clothing which buyers could “wear” via a picture they submitted, with prices reaching a maximum of EUR 30. A steep price for something that doesn’t exist in the physical world? Perhaps, but experts believe this is simply the beginning, and we’ll soon see others join in.

Digital clothing is here to stay

Even though one may not appreciate its importance, digital clothing helps humans create a fashion portfolio without impacting the environment. In an era where fast fashion has become public enemy #1, thrift stores are increasingly popular, and families are reducing their closet space (thanks Marie), these virtual items can fill a market void. In short, this form of clothing can:

  • Massively reduce environmental impact
  • Create new forms of scarcity for consumers
  • Enable new creators to tell their story without the need of an established brand
  • Create new jobs within the fashion industry

The beauty of virtual goods is that they do not depreciate over time, will be traceable if sold to someone else (tracked through blockchain) and can be almost unique when supply is limited by a developer. You won’t see everyone rocking the same digital clothing online, unlike what you might see in the physical world instead (including fakes). Ultimately, it enables greater creativity and self expression, but also potentially reduces judgement and bullying that people experience when sharing online. As such, the digital nature of the experience creates a potential wall of anonymity and safety that users will benefit from.

Cost and talent challenges

As a nascent field, digital clothing still has a lot of quirks. For starters, there are still very few people with proper 3D experience and credentials to make this more prevalent. It’s also expensive: The Fabricant, a digital fashion house, requires EUR 25,000 and six weeks to produce a small capsule. As things progress, companies will need to improve scalability and speed.

Can the value of fashion offline be replicated online?

Fashion maintains several key traits. In its most successful form, it captures cultural relevancy, tribalism, and identity. In an online environment, the places of interaction change. They’re often locked into platforms. Think Fortnite or NBA 2K. In these worlds, you can easily acquire exclusive items and in term create value for yourself in relation to your peers. But if there’s a lack of interoperability and the opportunity to bring these fashion items into other worlds, they’re fundamentally limited. The counterpoint is that in the future, if a Fortnite item is in a kid’s wallet and somebody is willing to transact some series currency for it, it doesn’t really matter. The on/off-ramps in the form of digital payments will find a way to figure itself out.

Regardless of the exact outcome, this is becoming another fascinating intersection where creativity and tech can combine to create new experiences for humans. Clothing, often bound by physical limits, will be unleashed through these new 3D models and systems. Time for you to build your online persona and get ready to steal the show online.

April 1, 2019

Food for thought — why customization and mass markets don't mesh

customisation mass market

In a world of mass production, brands look to innovate with new and exciting products designed for specific audiences. However, in a perfect world, all brands would love to fully personalise their offering to each customer. We know that personalised attention reaps great rewards for firms, but does customisation truly make sense for companies as they scale?

Shoe customisation & hard lessons

You might have heard of Shoes of Prey, the now defunct Australian company which allowed women to build their own custom shoes. It wasn’t just about adding colours to pre-made models: the company wanted you to tap into your imagination. The firm, through its research, believed mass customisation would make sense if it could achieve four goals:

  • Keep lead times to below two weeks
  • Simplify the design experience
  • No premium pricing for customizing
  • Effective distribution

Unfortunately, the company quickly realised that most people don’t want to take the time to customise their products in the first place. Shoes of Prey tried to change hardwired consumer behaviour without properly understanding the thought process behind their mentality. This ultimately led to the company’s demise, but sparked a larger conversation altogether about mass customisation.

Why mass markets are a miss

Many firms have personalization options for customers to play around with. For example, you can build your own Nike shoe, engrave your Apple gadgets and even monogram that luxurious Goyard wallet you’ve been eyeing for a while. However, personalization is not nearly as complex as full-on customization because the latter are often one-offs and unique (personalization relies on pre-existing goods). This hurts a company’s ability to scale, but also creates additional distractions away from core product focus. There’s a reason why firms like Apple sell a small amount of goods to begin with. In the end, most brands opt to limit customization options altogether, instead relying on great products that appeal to a consumer’s core beliefs and that can easily be accessorized (like a phone).

Drop Culture – Customisation With A Twist

Brands use exclusive drops to fill the void between full customization and standard products. Drops have a triple effect as they:

  • Galvanize enthusiasts and community members around a given widget
  • Leverage top influencers and celebrities
  • Help diffuse other products and introduce new lines for the parent brand

Smart companies know that consumers don’t want to think about what works for them. In fact, most people prefer being told what to like, avoiding the paradox of choice altogether. This is why celebrity endorsements coupled with limited releases of goods helps people feel part of a select club. The exclusivity facet creates a sense of uniqueness, just as it would with a custom product. However, this setup is better for manufacturers because it leverages an endorsement and does not require any effort from a consumer. You don’t need to dream-up Virgil Abloh’s Nikes and make them on Nike ID. Instead, you can let Virgil do the work for you (which also saves Nike the trouble). It turns out there’s a lot of money in industries that properly master these realities.

What Solutions Exist?

Knowing this, how can brands reconcile their need to better individualize their offering? Companies are already leveraging AI/Machine Learning systems to provide better recommendations to consumers (Alibaba is a prime example). Apps are also changing, with interfaces that adapt based on a user’s preferences and usage patterns. However, these are digital solutions that are easily scalable as data-flows and technologies improve.

What about tangible goods? The likely answer is that customization will always make sense for a select few enthusiasts that enjoy the process of creation, but will never be scalable enough to warrant more effort from manufacturers. However, that small but important batch of creators should become central to any brand’s growth strategy. By leveraging on open-source technologies along with community groups, brands can acquire this knowledge to better drive product initiatives. Instead of relying on in-house talent, firms can tap into an ever-changing and improving creator pool. Perhaps 3D printing will also solve the scale problem down the road, though it won’t stop people’s inherent need for convenience (being told what is popular).

Lastly, collaborating with creator pools enables network effects that span across industries. For example, a creator’s take and experience for a piece of tech can open up doors for a home appliance, building greater opportunities that branch out over space and time.

Creativity: a gift for the few

Perhaps the biggest takeaway from these trends is that true creators will become difference makers. Indeed, creators are best placed to take advantage of new designs and turn them on their head. Because masses rely on innovators for new creations, one person essentially becomes the customizer for a whole population. This should empower more creatives willing take on the extra lift and be rewarded accordingly. Even in an environment of loose patent enforcement (depending on the industry), innovators will always push the boundaries where they need to go. Those hybrid Nikes you’ve seen on the streets might just be a result of small customizers playing around with sole-swaps to begin with. Ultimately, true creativity is innate to all of us, but very few of us take the time to tap deep enough to create something meaningful. As such, we reward and often idolize those who do push the masses forward.

Until then, we look forward to the world brightest minds building exciting goods and services.

March 27, 2019

Apple redesigns credit cards, but can it change our relationship with debt?

Apple Card Titanium Goldman Sachs Mastercard

Apple recently unveiled a flurry of new products which includes its new credit card system. The card, developed in partnership with Goldman Sachs and Mastercard, will enable payments without the need for CC numbers, CCV codes and signatures.

To use the card, all you need is an iOS-enabled device and a point-of-sale terminal which uses ApplePay. This entry marks a continuation of the company’s expansion into new services.

Apple is diversifying to better serve its users

Apple is known as a hardware company first and foremost; this strategy has helped it become a trillion dollar company. The first example of this was the iPod which skilfully mixed a seemingly great value proposition ($0.99 songs) with beautiful but unremarkable hardware. An iPod’s performance is no better than that of a Zune, but we know who ultimately won the battle. Over time, Tim Cook’s behemoth expanded into services to diversify away from its main revenue resource. Given the recent iPhone slump, it looks as though the company will need to continue in that direction. Beyond diversification, Apple knows that its user base is incredibly sticky, and often affluent. We’ve seen the Airpod memes, but there’s a layer of truth to them. Scott Galloway explains it brilliantly here too: Apple is a status and sex symbol rather than an electronics company.

More ways to spend, but what about savings?

In typical Apple fashion, the new credit card is meant to help you simplify spending and improve your savings. Through an intuitive wallet app and clean design, the tech giant wants you to get the benefits of a bank with the simplicity of a fintech outfit. As always, Apple wants to be the tech giant that looks out for you; the keynote message was no different.  However, if we look under the hood, Apple might be enticing quite the opposite. For a start, the system provides immediate cash-back on purchases: the different gamification rewards will likely induce dopamine hits as you shop. The constant feedback loop and Apple’s line of credit might instead make users more likely to purchase even more via its devices. Even if the design is meant to help you view and understand your spending, most likely it’ll help dig a deeper debt hole.

Joining the dance

The move is ultimately not surprising. The new initiative is a way of tackling advances from competitors like Amazon. For comparison, nearly half(!) of US households are Amazon Prime subscribers. By opening up a payment gateway, Apple facilitates the first piece of the value chain: ensuring people have a way of purchasing goods at all times. Firms like Amazon have already figured this out, oftentimes mimicking rivals from across the pond in China.  Companies like Amazon also extend preferable lines of credit to top sellers, so long as the goods end up back on the platform, creating a positive cycle of purchasing and rent-seeking in the process. Perhaps we shouldn’t be surprised that Apple’s seeming good-will into payments may ultimately create more debt problems in the long term.

Can Apple improve our debt?

Debt is primarily a by-product of incentives and behaviors. Historically, very few companies have successfully changed human behavior patterns. Why would Apple do that? From a business-model standpoint, Apple might maximize profits from interest rates and other potential fees (the card has no annual fees or late payment fees, for now). More broadly, there are no reasons for users to change their behavior. If Apple instead chooses to provide better incentives around savings, then perhaps it can make good on its goals. More importantly, having such a vision will help it gain a greater foothold with consumers, further solidifying its niche.

March 24, 2019

Freelancers need health & other benefits. This is where Catch comes into play

Freelance catch safety net benefits
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Freelancing can be incredibly fulfilling and challenging at the same time. On one end, gig workers have the flexibility to work when and where they please and leverage their skillsets. There is no boss beyond a client, and freelancers can take on the projects they want. On the other hand, they tend to work much, much harder and precariously so.

For freelancers with limited savings, taking time off or going to the doctor’s is often not an option. Thankfully, new solutions are sprouting up, including Catch which offers freelancers health benefits. While Catch is a US-based startup, their recent attention shines a light on the insurance needs of a growing freelancer economy.

What is Catch?

  • Catch sells health insurance, retirement savings plans, and tax withholding
  • They target freelancers, contractors, and those without coverage
  • They have several services focused on evaluating health plans, retirement savings, tax withholding to help freelancers save for taxes, and time off savings to allow for vacations

Freelancers face today’s realities

Freelancers don’t get the perks corporate jobs provide their employees (normal perks like insurance, not tech perks). Whilst we know where the tradeoffs lie (flexible hours, pocket the profits directly etc.), this can deeply impact gig economy workers over time. As Catch’s founders pointed out, “(…) the existing state of the gig economy is hurting society. Without better systems to provide support for freelance/contract workers, we are making people more precarious and less likely to succeed financially.” Indeed, with wages and jobs stagnating, governments and companies are slow to react to today’s new employment realities. Freelancers make up a growing number of the workforce which is why Catch wants to latch onto this new opportunity.

Safety nets empower workers

More importantly, firms like Catch can supercharge today’s seismic societal changes. Providing freelancers with simple insurance and benefits can help take a load off of their mind and enable their best work instead. Employees tend to underperform when external factors impact them. This is compounded for freelancers who often need to pay significantly more for fewer benefits. For example, “(…) there’s a $6,000/year IRA limit for individuals while the corporate equivalent 401k limit is $19,000, and health insurance is much cheaper for groups than individuals.” Instead, new and nimble solutions will help freelancers do what they do best: create amazing work in an ever-changing work environment.

March 12, 2019

Venture Capital and publishing are more similar than you'd think

Venture Capital overlaps publishing

Venture Capital and book publishing have a lot more in common than you might think. According to Ethan Hirsch, the two worlds share many similarities including a focus on lopsided returns and bet-taking. As a result of increased competition and limitless supply, publishers continue to fight to attract the best writers as well as bring to life exciting books.

How Does Venture Capital and Publishing Compare?

To understand the comparison, it helps to comprehend what venture capital is. A VC pools money together to invest in small, unproven but high-potential startups. Depending on the startup’s development (ideation stage vs near full maturity), investors will fund and assess their stake over time. Early funding rounds include “seed” and “series A,” with subsequent rounds going all the way down to IPOs and full acquisitions.

Likewise, publishing firms will take a chance on up-and-coming writers to get their foot in the door. In contrast major publishers give large advances to more prominent writers in exchange for the rights to their books and future earnings. This is typically where things like royalties come into play.

Both fields have incumbents that tend to attract the best in the industry. Just as you’d expect A16Z to invest in Facebook (and get first dibs), you expect Crown Publishing to publish John Grisham or Michelle Obama’s latest book. The smaller firms need to fight and take bets on moonshots to become established incumbents, making success rates statistically lower.

Taking Bets

Just like smaller venture capital shops, publishers will typically pursue “blockbuster” strategies. Blockbuster means taking many small bets, expecting the majority to fail but for outsized returns on a handful. The same applies to VC: for every 10 businesses, 6 will fail, 3 will barely survive and 1 will be a major hit. This technique justifies the losses and helps propel these platforms upwards. Perhaps it’s not just startups and authors trying to win the lottery: VC and publishers are doing the same.

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