User:Jonas Lund/2012notes

Notes

Growth

http://paulgraham.com/growth.html

The growth of a successful startup usually has three phases: There's an initial period of slow or no growth while the startup tries to figure out what it's doing.

As the startup figures out how to make something lots of people want and how to reach those people, there's a period of rapid growth.

Eventually a successful startup will grow into a big company. Growth will slow, partly due to internal limits and partly because the company is starting to bump up against the limits of the markets it serves. [5]

If there's one number every founder should always know, it's the company's growth rate.

The best thing to measure the growth rate of is revenue. The next best, for startups that aren't charging initially, is active users.

A company that grows at 1% a week will grow 1.7x a year, whereas a company that grows at 5% a week will grow 12.6x. A company making $1000 a month (a typical number early in YC) and growing at 1% a week will 4 years later be making $7900 a month, which is less than a good programmer makes in salary in Silicon Valley. A startup that grows at 5% a week will in 4 years be making $25 million a month. [10]

The test of any investment is the ratio of return to risk. Startups pass that test because although they're appallingly risky, the returns when they do succeed are so high.

A rapidly growing company is not merely valuable, but dangerous. If it keeps expanding, it might expand into the acquirer's own territory --

CREAM

http://artmicropatronage.org/exhibition/C.R.E.A.M-Lindsay-Howard

The conversation around online art and commerce is not a new one. In 1996, Nick Szabo predicted the failure of micropayments, suggesting that their "mental transaction cost" [1] is too high. This assertion was later supported by Clay Shirky who, in 2003, argued that the goal of the Internet is "fame, not fortune," citing free content as an "evolutionarily stable strategy".

The past year has seen a major influx of mainstream art world influencers seeking real estate online (see: VIP Art Fair, Art.sy, and Paddle 8), no doubt looking to capitalize on the web’s massive distribution potential.

Why Your .JPEGs Aren't Making You A Millionaire

http://thecreatorsproject.com/blog/digart-why-your-jpegs-arent-making-you-a-millionaire

It’s time we get realistic about making money from selling internet art—it’s not going to happen. [...] digital content is infinitely reproducible and free while physical commodities are scarce and expensive.

1. Completely Free To Use and We Also Sell Your Data one of the most profitable uses of digital information and it is also the least likely to be applied to internet art. No one wants demographic information or ad space on a single artist’s website—there aren’t enough viewers, their clicking habits are limited

2. Freemium, or, Free Up Until You Want Better Features

With such a saturated market of images and videos, it should go without saying that no one is going to pay for access to an artist’s Tumblr archive, and if they did it would be copied and reposted immediately.

3. Donation-based Personal Charities Personal charities are a viable option in the short term but not a sustainable one. Besides—who wants to be the person to incessantly ask her friends for change?

4. Micro-patronage Everyone is a viewer, an artist, and a curator and in an attention economy a $3 donation may not be as valuable as a well-placed link or write-up.

5. On-demand Production In all of the competitive social jockeying for attention that takes place among internet artists, I’m surprised no one has yet went ahead and attempted to sell commissioned website links on their Facebook page for money.

when someone buys something from either of them, they are buying their art as a token of investment in the value of a brand—they are buying into a name through the guise of an object.

==Fame vs Fortune: Micropayments and Free Content== (2003) http://www.shirky.com/writings/fame_vs_fortune.html

mental transaction costs, the energy required to decide whether something is worth buying or not, regardless of price. The only business model that delivers money from sender to receiver with no mental transaction costs is theft, and in many ways, theft is the unspoken inspiration for micropayment systems.

Like the salami slicing exploit in computer crime, micropayment believers imagine that such tiny amounts of money can be extracted from the user that they will not notice, while the overall volume will cause these payments to add up to something significant for the recipient. But of course the users do notice, because they are being asked to buy something. Mental transaction costs create a minimum level of inconvenience that cannot be removed simply by lowering the dollar cost of goods.

The fame vs fortune choice matters because of substitutability, the willingness to accept one thing as a substitute for another. Substitutability is neutralized in perfect markets. For example, if someone has even a slight preference for Pepsi over Coke, and if both are always equally available in all situations, that person will never drink a Coke, despite being only mildly biased.

>For a creator more interested in attention than income, free makes sense.

The economics of content creation are in fact fairly simple. The two critical questions are "Does the support come from the reader, or from an advertiser, patron, or the creator?" and "Is the support mandatory or voluntary?"

Bare-Knuckle Reflections About Art and Commerce from a Digital Nomad

http://blog.art21.org/2012/09/26/bare-knuckle-reflections-about-art-and-commerce-from-a-digital-nomad/

Art is a luxury (if not utopian) commodity, priced according to volatile and subjective market parameters. The art market is exceptionally hierarchical, with a long tail structure that means that most art “workers” receive little renumeration for their efforts while a tiny minority trade their goods at markups that would make a stock trader blush.

I will not pay-to-play. I will ask for an exhibition fee (common in Europe.) I will not license work to Fortune 100 companies for free. I will not give a gallery percentages on income it did not generate. Finally, I won’t accept the implication that art making is an end in itself and thus should require no compensation. The production of the sublime is not without economic realities, and the failure to acknowledge this fact merely helps to marginalize art as a utopian pursuit fit only for idealists and dreamers.

The romantic idea that artists should create their work in blissful ignorance of market mechanisms is contradicted by even the briefest investigation of art world realities. Even in an art economy based on public funding (say, in my motherland of Norway) artists will adapt their work to fit market demand, such as the tendency of state-run institutions to value socially relevant or discursive projects over object-based practices.

>it’s hard to justify buying luxury commodities over making more of my own work.

Newspapers, Paywalls, and Core Users

http://www.shirky.com/weblog/2012/01/newspapers-paywalls-and-core-users/ Commercial radio is ad-supported because no one could figure out a way to restrict access to radio waves; cable TV collects revenues because someone figured out a way to restrict access to co-axial cables. The logic of the internet is that everyone pays for the infrastructure, then everyone gets to use it. This is obviously incompatible with print economics, but oddly, the industry’s faith in ‘every reader a customer’ has been largely unshaken by newspapers’ own lived experience of the move to the web.

In discussing why the most loyal subset of readers would pay for access to the Times, Felix Salmon described some of the motivations reported by users: “I like the product, understand the incentives involved, and want its production to continue” and “I feel that maintaining a quality NYT is immensely important to the country as a whole.” Now, and presumably from now on, the readers that matter most are disproportionately likely to score high on the God Forbid index (as in “God forbid the Sun-Times not be around to keep an eye on the politicians!”)

>an urge to preserve it as an institution rather than a business.

Micropayments and Mental Transaction Costs

http://www.gernot-gawlik.de/wp-content/uploads/2009/02/micrpapayments-and-mental-transaction-costs.pdf

Price Granularity 1. negotiated price 2. congestion price (variable but posted price/small value unit) 3. fungible (one price/small value unit) 4. flat fee (one price/large value unit)

Each of these levels successively imposes fewer mental transaction costs on the customer than the previous level.

==The Mental Accounting Barrier to Micropayments== (1996) http://szabo.best.vwh.net/micropayments.html

A basic requirement for market pricing to work is that both sides to a transaction be able to map charges to value obtained or rendered, so that they can adjust their buying or selling behavior accordingly.