Hey, Rob, welcome back. How you doing man?
Good. How are you?
Good, good chilling back at corporate headquarters for
another week. I'll be back in in Mexico here a
week and a half, but enjoying that beautiful Texas spring down
here. What's What's new up in New
Hampshire? Yeah, well, it's we have had
nice weather and it's apparently supposed to snap, so make up
your mind. That's that's hilarious and also
sounds like medium low grade hellish to this fragile Texan.
Well, we are taking a break from our normally scheduled
programming of helping entrepreneurs find product
market fit too detour into the land of defending capitalism and
safeguarding its future for for our children and our children's
children. What's this week's post is
called the fusion engine for progress, the demand side of the
future. And basically, we're going to
get into some critiques that I think you and I have heard with
our peer from our peers, that you specifically have heard from
peers that we saw at Harvard that are kind of like in the
public narrative. And also, I think in a very
interesting way applying like taking the pull framework, which
we discussed at a micro level and thinking about how does that
if we zoom out, is it a fractal? Like does it also apply, you
know, more broadly across across an economy, across the system?
And so Rob would love to start with just like, why is this on
your mind? Like why?
Why are we headed in this direction today?
Yeah, I think 2 reasons. But is fractal the word you just
googled? Is that the?
Word that you just like. Got it.
I nailed it. You know.
That's just, I actually don't, I don't know if that's the right
word. I'm like 73% sure.
But I think a fractal means like what works at a small level also
works when it's applied at a broad level.
Yeah, it works across scales. Yeah, yeah, yeah.
I'm, I'm very proud of that word.
That's that's a good one. So yeah, like I think it's a
Nasim Taleb concept, if I remember correctly.
Anyway, he. He he talks about it.
Yeah, yeah. So I don't know.
So what what are we doing here? We are basically developing a
way of thinking about start-ups and thinking about business and
thinking about roughly a way of thinking about 0 to one, but
that the way to think about 0 to one has implications for how
businesses generally work, how sales generally works.
Like this model that we are developing is a, it is like I
think the missing foundation for why and how businesses work.
That's how I view it. That's what I think I'm doing.
I could be crazy in thinking that it is that important and
that that relevant, but I think it's actually a base model for
why people buy things and why new products work, which also
makes sense for existing. It has to make sense for
existing products. If you can't explain why new
products work, you kind of can't explain why existing products
work in a in a causal way. And so we're focused at that
small level. And so that's fine.
It's great. It's like super helpful and I
think it's it's helped a lot of start-ups take off.
But I think there are some bigger questions that this model
can answer or some that it can. It can help us see the world in
a slightly different way. I find that when people learn
about demand, it's a new lens, they learn about pull.
It's a new lens for seeing the world and for seeing their
business. And so the thought was, OK,
cool, I've been seeing this. I've been having these like
conversations about capitalism that are just kind of like
thrown at me. I don't go seeking them out.
I just get, you know, I just get blindsided by random
conversations about capitalism. I'm.
Just hanging out in Cambridge, caught Smokey Cambridge coffee
shops and, you know, close to the philosophy department.
Yeah. No, God, no.
I am. I am in New Hampshire.
I am with normal people, right? I'm not this is these are not
conversations with like as I right in in this post, one of
probably my favorite line ever. This is, these are not
conversations I'm having with like University of Berkeley
professors of Marxist history, right?
These are just normal people with normal jobs who are not
like Ivy League eggheads. They're normal people.
And they kind of, there's this valence of like capitalism is
bad. I just get dip punched in the
face with that every couple weeks when I'm just interacting
with some normal person. And it's just 'cause it's been
in the back of my mind and it's, you know, it's something that
I've probably heard forever, right?
About I probably heard complaints about this forever.
And I was thinking about it and the pull framework and I was
like, oh, this might have something to say about it.
And so I thought like, that's thing one thing 2 is this
podcast and newsletter will probably get us both uninvited
from reunion and I don't want to go anywhere so.
Let's do it. I kind of hope so, yeah.
You know, let me, I think let's start, Rob, if you're cool with
it. Let's start with just like the
explanation, like how does pull extrapolate to an economy
essentially or to a system? What does pool mean when we're
not talking about me, Robert Carpenter with my business
trying to sell or trying to identify pool or demand or grow
my startup or find product market fit, But instead thinking
about it more broadly, I'm going to read the way that you open,
you open this, this sub stack. We are trying to do things in
our lives that this trying to do things is what I call demand, is
try to do things. As we try to do things, we
sometimes find that we are blocked.
We don't have the right methods or means or tools.
Maybe existing tools are too expensive.
Maybe they're not quite right. This is blocked.
Demand what I call pull. When there's pool, there's a
space where a new thing could come into existence and unblock
us if it unblocks. If it unblocks us, we buy it.
We keep trying to do things. We strive for more and bigger
and better because striving is human.
We get blocked as we strive and new space, new spaces emerge.
The cycle repeats. Rob, can you, I, I was trying to
extract myself actually from while I was reading through
your, your post, trying to extract myself from like, you
know, 1824, whatever number of months of having been exposed
and influenced by your ideas to think like how did I used to
think that that capitalism worked at a micro level and then
how that extrapolated to it. And I think I just, I, I like,
didn't really have it. There was like people, people
buy things, you know, invisible hand.
There's a market that exists. I, I, I don't think it, I, I
never made the connection, which is one thing you've helped with,
which is what happens at a small level, which aggregates and how
that aggregates to a much bigger level.
But would love, would love your thoughts.
Rob commentary on what does what is the connection between pull
and capitalism, and other thoughts you have on like how
the system works. Yeah, I think so.
Usually when you take like economics one O 1, you learn
kind of there's supply, there's demand and there's the graphs go
like that people buy things. But like, we don't actually
learn that at the individual level and like what causes a
person to buy a thing and what causes a new thing to come into
existence. And so we, I think that is
actually the level of analysis that all of this has to start
at. Because otherwise you're dealing
with like abstractions and like concepts of willingness to pay
and, you know, likeliness to like willingness to produce and
all those kinds of things which are abstract concepts, they're
fine, they're useful. But we don't understand the
mechanism by which willingness to pay emerges, new products
emerge. And if we don't understand that,
that we don't actually understand the system, right?
We could, we could talk about how people typically in their
minds think about capitalism and, and how this works.
But if you start at that level, right, just that simple rule,
I'm trying to do something in my life.
I am blocked from doing it by my existing tools, methods, options
that those two forces that we've talked about for a year now
Createspace for something to unblock me that I will pull,
that I will buy. If that is the only thing you
need to, that is the only rule I think you actually need in order
to derive, like how how capitalism works.
Yeah, the, you know, for me thinking about supply and demand
and having, you know, studied economics, it, it was like,
yeah, the abstraction of what is the volume of steel that the
United States would consume like in a given year?
And it's like that idea exists that it was like if you would
have, would have asked why does that?
Why is that the level? I would have had a really hard
time drawing it. But it's like the job or the,
you know, the demand in that case, the thing that's blocked
is like probably construction primarily, or, you know,
creation of durable goods. And each one of those individual
decisions has, you know, this trade off this, this decision
on, you know, what, what are my options?
What's the best option? What's the most economic option?
And like understanding it from there as 100,000 a million, 10
million different individual decisions, looking to unblock
the construction of a building, looking to unblock the
construction of a car, the development of a factory and how
that relates to individual pull. Yeah, like that's, that's the
way the direction my brain goes when trying to make sense of
this. Yeah, yeah, I think that I think
it like makes sense to say, OK, cool.
This this thing that I've described, this kind of pull
thing is human, right. We're all trying to do things in
our lives. We and everybody who has ever
existed basically has been trying to do things as they go
about time and they've then blocked.
They just haven't been able to do the things they wanted to do.
And those spaces have always emerged.
They've always been there. The question like, but it's that
doesn't mean that a product just comes into existence.
Somebody has to see that space and say, all right, cool, I'm
going to put something to fill that space.
And there has to be a reason for them to do it right.
It's not easy as everybody who listens to this, but probably,
you know, they, they don't understand this in the faculty
lounge and in the, you know, sociology department at
wherever. But like everybody who listens
to this knows how hard it is to build something that people will
buy and use. Build something useful.
Yeah. There has to be a reason to do
it or it just won't happen. And what capitalism does is it
creates the incentive through property, right through, through
like a money system. But but it's basically like I
now have an incentive to build something useful that fits in
that space. Everybody has that incentive to
do that thing. And when we do that thing, we
get better off. We get unblocked from the things
we want in our lives because now we have money.
We have right, Like now we have whatever, right?
And and that's a, it's a, it's basically there's an incentive
mechanism for us to unblock other people and it's totally
decentralized. It's not I don't have to go and
ask for approval, which means it had like the the capitalism is
the system that make sure that all of these spaces get filled
by default. And as one space gets gets
filled, there's space for the next.
The next space opens up after, right?
Like after I have built a home gym, I like, yes, I've filled
that space. Now I need heavier weights,
right? Like, and it's, it's this stuff
just keeps going and keeps going and keeps building on each
other. And it starts with small things
and then it ladders up to bigger and bigger things.
And so that's the, that's how, again, just from this simple
rule, person trying blocked space open person incentivized
to fill that space. That's how humanity's progress
works. That's how progress has
happened. It's the cause of it.
And it start, it starts out with somebody deciding that they were
going to improve the transportation of grain to the
market. And then next week we're
launching a rocket to go back to the moon and maybe to Mars
eventually. So you know, we we.
Created the Japanese toilet like you know.
Yeah, come on. But let's talk about push versus
pull capitalism, which is one of these, you know, criticisms that
you you draw out. Could you give the context on
what you mean by push versus pull capitalism, Rob?
Yeah. So it like it, it really matters
how you think this micro level thing works, right.
This micro level thing we've been talking about, I believe
that people buy products when they are trying to do something
but blocked by their existing options, which creates a space
for a product that they will pull.
That's not how you mentioned it earlier.
Like you hadn't really thought about kind of like that level of
this and most people have thought about that level of
this. In fact, if if you don't think
about it at that level, then you might default have this valence
that well, why do people buy things?
Because they're convinced to buy them whether or not they need
them. Sometimes they're good things,
sometimes they're bad things. But but right, like how why
people buy things is they are convinced by somebody to buy
things that they may or may not need, right.
That is the push model versus the pull model in general.
Now, if you think that the way all of this works is through the
push model, then you basically think, OK, cool, it's a bunch of
people convincing a bunch of people that they should buy
things. That isn't inherently good.
That is actually probably amoral at best and perhaps parasitic at
worst. And it's something to be like
guarded against, to be to to that is not a inherently good
thing. When you see it as pull, it's
like by default, it is unblocking people and it's
mechanisms for unblocking people that that are just just kind of
like work on mostly autopilot. Then it's like, oh, this is a
default good thing. And so just you just how that
works at a micro level, are people or do people buy things
to unblock themselves from what they're trying to do or do they
buy things because they're convinced to buy them?
That simple like difference in Rule will determine how you
think about capitalism, whether it's a good thing or a bad
thing. Yeah.
And the, the more that you spend trying to build things that
people want, I think that resonates even more deeply or
interacting with people that aren't subject to that same, the
same pressure. Maybe one, one question here,
Rob, like the, it feels to me like there's, there's a couple
different criticisms of capitalism that are existing.
I think you're, you know, approaching one, which is like,
there's like a snake oil version of somebody trying to convince
you and sell you something. And that you're just like
overwhelmed or like humans are overwhelmed by these arguments
and they end up purchasing, but they are poor and worse off as a
result of it. I think that's the one that
you're addressing there. How much of it do you think is
like, is that versus there's a bunch of externalities that
happen like whether through quirks in human psychology, like
our inability to turn off our desire to the carbohydrates, for
example, And so like rampant obesity in the United States or,
you know, pharmaceuticals that end up like, you know, pushing
opioids in U.S. markets or a destruction of environmental,
you know, you know, yeah, ecological spaces or some of the
things that exist within a, an, a framework of American
capitalism, but aren't necessarily I, I don't know that
they're fully explained by that push versus pull like approach.
I'd love your thoughts on that. Yeah, I think that the
externalities case is a is a very real case, right?
And it's like, OK, cool. How do we how do we reckon with
the fact that in order to unblock people, we might burn
down forests, right? Or, or whatever, whatever The
thing is, right? Or we might, you know, like we
might harm animals, which I you know, I don't that that's a
thing that that we struggle with.
These are these are good questions to talk about, but we
have to say though that like we have to say that the core
mechanism is good, is by default good.
And that's what that's where I'm staking.
My claim is that the core mechanism is good over time,
which changes how you approach questions like externalities,
changes how you approach questions like regulation,
because I assume that over time people, right, like in some ways
this is blocking people. In some ways bad things that
companies do are blocking their customers are blocking and, and
sell it, which means they're not serving their customers well,
which open space for new companies to come in.
And so like you see in a lot of cases where where companies have
seemed dominant in spaces and they kind of mistreat their
customers and someone else comes in and crushes them.
And I think right, like there's a question of to what extent
does that happen in externalities?
How do we make sure that the those externalities are
internalized? These are all like fine, these
are good questions that have good debates to have, but I'm
staking my claim on the the core process here being a good
process. And having been close to
Venezuela and understanding like the environmental destruction
that happens in a system that is not capitalist, that's
socialist, it's not a uniquely capitalist problem that exists
there either. You mentioned Rob, social
responsibility and. And social, let's see, I'm going
to, I'm going to read a paragraph.
I'd love to have this conversation with you because I
think there's a specific context and a specific approach to
entrepreneurship that you're discussing.
And I'd, I'd love to understand it more.
You write, if you believe that in order to be a good person,
your business needs to be focused on some social purpose
or mission, you're going to fail because you're actively not
focusing on unblocking customers.
I meet so many social entrepreneurs who win pitch
competitions, but never win customers.
We're wasting so much talent and energy.
I'm gonna, I'm gonna put on pause my defensiveness on on
this one and just try to understand like what's the like
what, what is the, the, the context, the ideas that are
coming to mind as you as you write about this.
Yeah. So this is so this is downstream
of the argument of right. Like if you believe that
capitalism is push capitalism where we convince people to buy
things they don't necessarily need, what you have to do in
that case is you have to append morality to capitalism, right?
And so that's where a lot of these concepts have come in.
We've just, we what what's basically happened is we have
ceded the ground of capitalism being a good thing by saying,
OK, cool. Well, we have to append social
responsibility. We have to append social to
entrepreneurship. We have to append these things
that are like, yeah, I'm that are basically saying, yeah, I'm
working in a dirty industry, but I'm trying to do it morally.
And so that's my objection here. That's what this is the thing
that we learned. I'm pointing at you, but you can
you can deny learning this, but this is these are all of the
things that we learned had the substrate argument of capitalism
is bad or not good. And so we have to append
morality on top of it, or we have to add this thing onto it
to make it good. Versus let me, let me frame,
excuse me, try take a stab at at framing two different ways of
approaching it. One is I'm in a dirty industry,
but I'm not like everybody else. Like I do it a better way.
And, and, and as a result, well, I don't know, actually,
actually, I don't know how that continues.
As a result, I deserve to win or something like, or it's better
for society. If, if I, if my product wins or
something, another approach is there's a better way of doing
business that, that, that has a different morality like embedded
in the in the business model and consumers will or will respond
to that. And there's actually there is,
there is a blocked demand, which is for a better way of
operating. Is that, is there a difference
there that that we're teasing or is it, is it just that you know,
so there's there's but yeah, help, help me understand like.
Make sense of that. My my argument is that
unblocking customers is a social mission.
You don't need an extra 1 on top of it, and in fact when you try
to add an extra 1 on top of it, you stop focusing on just
unblocking customers. Which means you don't succeed,
right? Because your business can only
succeed if you unblock customers.
Yeah, Yeah, yeah. Let me let me sit with that for
a second. The the way internalizing it
with with my business, it would be like the process of
unblocking customers in my case means giving higher quality
content to children and families like that's and the unblocking
piece embedded in it has the like social benefit element to
it. Is that, is that the way to
think about this, Rob? Yeah, yeah.
Like by virtue of like by virtue of selling to brands, you are
helping unblock them to reach people who like need to hear
about them. You're helping unblock them
because they they're blocked from accomplishing something
that by unblocking them, you are just doing a like good.
You are serving them. And when you focus on unblocking
them, you build a better product for them, you build something
better over time, and you continue to serve their needs,
continue to help them make a ton of progress.
Yeah, that the way I would probably articulate it in my
case is like having created like a a pure product for families
has created valuable spaces for brands to then participate.
And so the like the most of the social mission.
Well, I guess there's two elements of it.
One is having created something that is pure for families, and
the second side is the selection of brands that don't cause
conflict in between the presence of the brand and the the media
that's being served to kids and parents.
Yeah. So like the second thing here,
so we, we talked about like what this does to kind of like the
social entrepreneur, the person who thinks that, oh, just
serving customers, that's not enough, just unblogging because
that's, that's not enough. That can't be the mission.
That's, that's, you know, 2 down in the weeds and the other
that's not, we have to, we have to save the whales.
We have to do what whatever The thing is there.
What that just makes those people, it makes something
that's already hard 100 times harder.
So it can work. Obviously anything can in theory
work. That's within the laws of
physics, but it makes it way, way harder for them.
But what it also does is it's we've ceded the ground of this
capitalism as a good, as an inherently good and moral thing.
We're just saying, yeah, it's not good.
So we have to add social missions onto it.
Which the problem with that is that it basically takes a bunch
of people and gives them the excuse to say, don't hate the
player, hate the game while they do stuff that is not good.
And so it we it's a self fulfilling prophecy.
When you say when you say, yeah, capitalism isn't good, we have
to append goodness on to it. Well, then the people who are
trying to append goodness on to it don't succeed or like very
rarely succeed. And then everybody else doesn't
realize it's actually a good thing.
And so they do the like they, they don't approach it that way.
They approach it as if it is push capitalism and they one,
they they like don't build good things and two, they don't have
good enough competition because everybody just has the wrong
model in there. And so This is why my, my like,
the thing that just, you know, riles me up is, you know, the
kind of we'll just either the sweater wearing person who's a
very moral person in their private life and very kind
person who then goes and rolls up youth sports leagues with the
only thing they're going to do about it to be triple the
prices. Because it's right like, well,
capitalism, right? Like there's an opportunity
here. Let me attack that opportunity
and dot dot dot, right like it, which is it's basically giving
that person the the ability to not like to look at themselves
in the mirror and say don't hate the player, hate the game.
It's a it's a rigged game. We've all got to make like, like
that's what this is doing. What's the what's the
alternative there? We know a bunch of those likes.
What are wearing folks that you're talking about?
What, what would you rather or like?
What is the system that you would rather see exists that
either that opportunity doesn't exist or they don't pursue it or
like, what's the, what's the version of reality that you
think is a, you know, could exist if people viewed
capitalism as a, as a positive, as a, you know, a force for a
creative, a positive creation. Yeah, so again, I, I, I don't
know, but my default would would not be like, I think they that
kind of person should be ostracized and feel bad for
themselves for about what they're doing versus like, you
know, feeling fine. I'm just playing a dirty game or
I'm in a dirty system. But I'm a good person, right?
Like I think that person should just feel bad and think
differently about things. But I generally like the
approach of OK cool, they are creating blocks demand.
When other people see that they should go and attack that
business and go build something awesome that unblocks those
customers. And, and I, I like that as the,
the mechanism because it requires no one from the outside
or like no kind of like higher power that we have to, you know,
it doesn't, it doesn't require kind of like laws or or whatever
to get involved. It's just like the dynamics of
the system solve itself if people understand the system
dynamics. Yeah, that's interesting.
It'll give me something to chew on.
Some of the statements that you've made, I would temper
personally based on my view of capitalism and how it works.
You've come in really strong with the capitalism is a for a
moral force for getting what I would say is like capitalism
needs to be embedded in a moral understanding of society and
then it becomes something that is that is positive.
But like that I don't I don't see like capitalism solving for
like the addictiveness of online poker and like the, you know, it
like that. There's some things that that
don't. I don't see how there's like a
better, more moral business model, but that capitalism
operating in a moral understanding of how people like
you talk about shame and things like this.
Like I think that's good. Like it has to be connected to
the way that a society and a people want to want to operate
and want their or their communities to be structured and
organized. I, I, I actually 100% agree on
that. And then the other thing here is
like capitalism only works, you know, if we're not act always at
war and like being invaded and some.
So like there there were, there's some kind of like
underlying things if there's a rule of law, right?
Like there are these kind of underlying things that are
enabling that enable capitalism. But those things without that
system do not 'cause progress. Yeah.
And that system without those things don't doesn't work.
And so they're kind of tied together, but it's the like what
I wanted to spell out is what is the causal mechanism for new
things coming into into being that cause humanity to progress?
And, you know, I think I'm falling into the same trap that
happens in like, you know, talking heads, CNN world, which
is failing to appreciate that capitalism is doing 94% of the
work. And like, that causal mechanism
that you're talking about is that force taking that for
granted and focusing on like, the other 6% that's like, yeah,
but like, this thing is broken. And it's like, yeah, we could
find those broken things, but first appreciate the huge
factory that actually is working powerfully behind the scenes.
And if you dismantle it, the whole the whole thing falls
apart. And that's a really, really good
point that just made another thought click in my head, which
is if you want to solve the externalities and all these
other problems, you have to 1st understand how the system works.
What, what, how the system. It's like, OK, cool.
I tried to assemble a computer and it kind of didn't like, I, I
tried to assemble a computer from parts.
I followed the instructions. It didn't work.
And it's like, OK, cool, what do I do now?
I don't know, let me just take a baseball bat to it and break the
like, it's like, it's like, no, I actually have to understand
how a computer works at this point in order to know how to
intervene to make it work better or, or, or whatever.
And so it's, it's if we don't understand how this works, we're
essentially just going to take a, a baseball bat to, to the
thing because we don't know. We don't know what is load
bearing or not. Yeah, fascinating.
Well, the, you know, my, my biggest critique on this one is
that we didn't drop it 10 days before Thanksgiving to arm
everybody for conversations with Uncle Fred and Aunt Marge.
But yeah, this. Podcast will make you
insufferable with your friends. On this this this.
Newsletter. Just forward it to your family
and delete your e-mail. Rob, other things that we want
to hit real quick. This thing is fun.
We'll be back to, you know, more normal stuff, but it's, it's
just cool. And like I, I don't know if you
don't like this stuff, I'm sorry.
But as we develop the models here, we kind of have to look at
them from a bunch of different angles and say, do they work?
What are the implications? Like what, where, where are the
edge cases on them? And so this was a cool thought
exercise. That's been, you know, an
interesting thing about your approach.
Having been close to you, I don't know if we talked about
this, but exactly what you just said, you know, having come from
a math background, it was like you would, you would test the
extremities to understand how like a system worked or how a
formula worked. And in, in this case, what what
you're doing is you're taking a, a model and saying like it.
We'd think it works at an individual startup level or at A
at a small business level or growing business level.
Does it break if we expand it dramatically?
And which is a good stress test for, you know, is this, is this
actually the way that the world operates at a micro level?
To understand at a micro level is to test that at a macro
level. And does, you know, is the thing
that's happening actually a summation of all these micro
things or is there actually something else that's going on?
And so, you know, folks, if you if there's holes to poke in
this, leave it in the comments like, you know, poke, poke that
hole. Like what?
Where does this break in an important ways?
And is there some is there an A refinement to Rob's theory that
you know, he needs to be conscious of as he can do
continues to develop this? Yeah, What I'm, what I'm trying
to do too is I'm trying to make it simpler over time.
I'm trying to make it because I found, like I found there's a
lot of different frameworks and stuff out there that you'll kind
of touch on different pieces, but I think this actually needs
to be ridiculously simple. I, I, I don't know why I feel
that way, but it just feels like that's the like direction that
it needs to go in. I don't think it needs a lot of
moving part. I think more moving parts the
system has, the harder it is to, to, to make work and then to
whatever. So what you can see here is like
we talked a couple weeks ago about blocked or coping.
I actually have now grouped both of those into blocked because
it's just right. It's I'm blocked from
accomplishing whatever it is I want to accomplish.
Maybe I'm using something, maybe I'm not currently about it, but
I'm what what I'm trying to do here.
And as I'm building this 100 slide mega presentation thing
about the book some I'm just trying to make it simpler, more
essential and, and, and so, yeah, well, we'll keep going on
that. Awesome.
Perfect. Well, we will catch you next
week, Rob.