Reconnection Costs

Here’s one:

Maybe Sandra’s games are best when the players feel at home with each other. Maybe Margaret’s dinners are best when people eat around a big table and share food.

On the left, this was easy. Margaret’s and Sandra’s friends already feel at home and they’re happy to share food. The relationships are already there.

Now, Margaret could make this happen in her restaurant, but she’d have to put together a bunch of strangers, make sure they're strangers that like each other, that they have similar sources of meanings, that can hold each other in high esteem, appreciate each other, etc.

Part of how the market is functioning — for all these suppliers — is that it’s breaking people apart and selling individual tickets, individual meals, or putting William’s poems on individual feeds.

This is part of what makes it so scalable!

But it leave Margaret, Sandra, and William with an additional cost of rebuilding community. Once their customers have been shuffled up and bought individual tickets and meals, there’s this transaction cost of getting all those randos to like each other, to convince them the others are cool enough, etc.

I’ll call this the “relationship-rebuilding” cost of markets and recommender systems. Many activities can't happen, because the relationship rebuilding step wouldn’t be cost effective.

And clearly this cost falls more heavily on some entrepreneurs than others. It falls more heavily on those making spaces, than those making funnels or tubes.

Loss of Deep Demand

Another problem is that people's needs—most of them—all the good ones—are deep. It’s quite hard to figure out what they are.

On the left, William wrote poetry for two friends. He knows what they find meaningful. He can sense: will this poem light their hearts on fire?

• You need to know someone quite well to customize something for them. And in these cell structures, you don't have that kind of time with a person usually. So you end up serving just mostly their shallow needs.

It takes time to learn that, about a person. I’ve known my dad my whole life, but I’m still learning what lights up his heart.

Obviously, William, Sandra, and Margaret know less about their anonymous customers than about their good friends. So, they’ll have to serve them differently. Their meals and poetry readings will be less personalized. Margaret is more likely to serve pizza—which pretty much everyone likes—and less likely to serve that special dish from her friend’s childhood.

At least Margaret can serve pizza. William and Sandra are in more of a bind. When they were supplying their friends with games and poems, in those durable relationships, they had time to discover one another’s sources of meaning. Sandra could discover her best friend’s sources of meaning and select a birthday game just for her, that she’d find super meaningful.

She can’t do that at her events. She needs to serve people using only information she can rapidly acquire.

Markets and recommender systems are more sensitive to shallower demand. There’s a consequent loss of the deeper demand. Deep demand goes unmet because only shallow demand can be articulated.

This, also, seems worse for space-makers than for other kinds of entrepreneurs.

Tragedy of the Tennis Court

• Third problem is that people are not just consumers. They're also actually the things that we want to do. involve our creativity involve our generosity involve action, and collaboration. This is what we want out of life. But just like people's needs are to assess people's generative possibilities are even harder to assess. And take time. And they also take kind of negotiation, there's a lot of communication required to figure out what's possible between a group of people and that also can't happen in a sell because usually just one consumers buying at a time or something, so there's no opportunity for this negotiation that would normally happen. So that reduces us to our kind of pure consumer or transactional selves. And we miss out on a lot of collaboration possibilities.

When people are embedded in social networks, as these dinners and events get planned, there’s a negotiation and brainstorming step. There’s a question—how can everyone's needs get met? Who will bring the wine? What shall we do?

This can surface many opportunities for people who want to do similar things at the same time.

Imagine all my friends want to play tennis. We could band together and construct a court! We could play doubles on a rented court. Some of us could teach tennis lessons or practice serves in a field!

Part of how markets scale is by skipping that negotiation and brainstorming. Instead, every supplier makes a menu and people choose from it.

• The tennis court can be reserved by one party at a time.
• The tennis pro can be booked hourly.

That makes markets scalable and powerful, but also creates artificial rivalry. Suddenly, my friends connect only via the tennis court booking app. They compete to book that one tennis court. They never know that it’s their own friends they’re competing with, and they never get a chance to negotiate or brainstorm.

When markets and recommenders are in between us, they limit the structure of how we collaborate.

Call it “the Tragedy of the Tennis Court”.

I just gave an example on the consumption side, but the same thing happens among suppliers. Back when Margaret was cooking for friends, it was easy to collaborate with other suppliers. She could have William come read a poem at dinner, and after dinner everyone could play one of Sandra’s games. Once people have set up their menus and prices, this is less likely.

Three Problems

So these three problems — reconnection costs, loss of deep demand, and the tennis court tragedy — they all occur whenever there’s a shift from the structure on the left to the one on the right. And they are all worse for space-makers than for people who make funnels and tubes. In fact, the change often leads space makers to pivot their businesses, to become funnel or tube makers.