Value Capture
Vivek Srinivasan
Investment, Finance, Startups, Go to Market | viveksrinivasan.com | learningbyproxy.com
You buy something only when you feel you are getting more value than you pay.
Electricity offers great value. You can preserve your food in the refrigerator, be entertained by your TV, be productive on your computer, cook in your oven and be useless on your phone.
If the electricity provider wanted a share of the value from preservation, value from entertainment, etc their value capture would be great, but your value generated would diminish.
Thankfully the government classifies electricity as a necessity and regulates it preventing this kind of thinking.
Take email. Everyone uses it. But would want to invest in a company that provides just the email service? 99% of the value goes to the consumer and 1% goes to the producer.
CEOs are not appointed to run a business effectively; they are appointed to increase shareholder value.
Would you want to be the CEO of an electricity company or the next big AI thing?
The excessive focus on shareholder value has meant that businesses want to flip this equation. They want to capture more value from the shareholder than the customer can themselves.
This is part of the reason healthcare and education are devolving into shit.
In your circles do you know anyone who is paying for ChatGPT? I do not know any. But the company is making billions! The Information published a report that states that OpenAI has 15.5 million paying users. That seems impressive until you realise that Apple has over 34 million registered developers.
All the people who have a ChatGPT subscription are people who are hoping to capture all of the value for themselves! Mostly developers trying to build a layer on top of the word regurgitation machine.
The truth of the matter is that ChatGPT provides very little “value”. The excessive hype sold to the shareholders implies that they must index for value hoarding, not value distribution.
There was an Indian startup that similarly tried to hoard value, if you want to know what happened to it, go here.
No matter how this ends, businesses need to think about not only the value they create for their customers but also for society as a whole and the environment that makes this society possible. This has been ignored for too long and this form of value hoarding is untenable in the long run.