Choosing Value over Marketing
Hi there,
I hope you’ve had a restful week. It’s a sunny 70 degrees, with clear skies, here in New York City. Friday is a peaceful day. The day we can begin to distance ourselves from the tumultuousness and stress from the rest of the week. Take a deep breath in and out. Relax your posture. I hope you enjoy.
On Business…
One thing that's been on my mind is sorting companies into two categories:
1. Those where the growth function = value proposition
2. Those where growth is misaligned with the value proposition.
Here’s what I mean:
Take Facebook.
The core value prop of FB comes from its network. The more people on the platform, the better an experience it is. The more of your friends that are on it - the cooler it is.
Simultaneously, the greatest contributor to their growth comes from the network effect. The more users, the more attention. The more attention they can hold, the more money they can make.
As a result, Facebook lives in alignment. Improving the product (making it engaging and adding people to the network) is key to improving the business’s growth.
Exons' core value proposition is Oil and Gas.
The greatest contributing factor to Exon's growth is price and reliability. The cheaper and more reliable they are, the more they will sell.
Exon is incentivized to improve the efficiency of their oil and gas extraction, and the reliability of their supply chains, so that they can grow the most.
I currently work for Thirdweb.
The core value proposition of thirdweb is developer tools.
The growth function of developer tools is the quality of the tool. If our tools aren't helpful, developers won't use them, and you won’t make money.
There exists an alignment between thirdweb's core product offering and how they grow.
On the flip side…
Look at a business like dropshipping e-commerce products:
Pretend we are selling neck massagers.
The core value proposition of the product is to relieve your neck.
The growth function, however, isn't improving the product. It's marketing: it’s about driving traffic to your landing page, collecting emails, running social media campaigns, etc.
Here, improving your product doesn't directly improve your business metrics, because your business metrics are more correlated with the process of selling than with the quality of your product.
Or take the diamond industry:
For a full breakdown of diamonds, watch from 48:78 (super interesting)
Tl; Dr:
• Ownership of diamond mines has been highly centralized in the hands of a few individuals.
• These individuals decided to artificially constrain the supply of diamonds to improve margins
• Through clever marketing tactics, diamonds were infiltrated into Hollywood, the lives of celebrities, and created a cultural consensus that the size and quality of diamonds are proportional to the amount your man loves you.
In reality, diamonds don't need to be anywhere as expensive as they are, yet there is still a social phenomenon where we (at least in America) obsess over them. (More than 80% of brides in America receive diamond engagement rings.)
Diamond companies aren't incentivized to manufacture affordable diamonds. Instead, they are incentivized to increase the social perception of the value of diamonds, so they can create the highest margins.
Their growth is more about playing on our psychology as opposed to improving a functional process. It's more about the process of selling, rather than the processes associated with what is being sold.
--
The purpose of this is not to criticize marketing. Marketing is a super important tool in spreading awesome products and services.
The distinction I am drawing is to recognize which industries are incentivized to operate better (to optimize processes, create more tangible value to society by improving something, etc.), as opposed to industries where the biggest contributing factor to their growth isn’t how good their product is, but how well they market it.
I respect companies that opt into creating tangible improvements for society, more than those that lean on their ability to sell to be sustainable.
On Life Philosophy…
I’ve found one of the most rewarding sensations, for me, comes from the emptiness that comes after having put lots of effort into something difficult (be that a workout, a long day, or a project).
The whole world can be falling apart but I stay focused, cutting through the chaos, getting things done, and moving towards a goal.
This sensation is incredibly motivating and rewarding.
I'm on a mission. Other people can join me (and I certainly hope they do - life is better with awesome people). However, I have everything I need in myself, and I stay committed to moving toward my goals.
To reject instant gratification, and keep moving forward. To put effort into the universe. It is, interestingly, its own form of pleasure.
Other Updates
I’m planning a hackathon at thirdweb. Check it out here.
My first rock-climbing competition is going to be next Saturday. Psyched for that and training hard.
It’s college application season - so there’s an ongoing pipeline of supplementals and common application drafts coming through ;)
What did you think of this newsletter? Reply to this email with your thoughts on structure, content, formatting, typos, or anything at all. I read. and respond to all of them :)
See you next week 👋,
-Satvik