Connecting dots: Need, Value, and Price

This mood board is a reflection of my ongoing thought process of creating and investing in enduring business based on human needs.

As a former operator, I consistently guided my decision-making with two questions: "What am I creating?" and "How will this creation evolve over time?”

Transitioning to a venture investor role, I am fortunate to engage with various forms of creation and glean insights from talented founders worldwide. In crafting my investment thesis, I was driven to move beyond conventional analysis and unravel the complexities down to their core.

Through the process, I intend to understand the mechanisms behind enduring business, examining their patterns and contexts over time. At the same time, I hope this write up helps identify tech venture opportunities with the perspectives of human behaviors and provide input for creators aspiring to evolve their venture creation into enduring businesses.

The following questions steer my continuous quest:

• Can we identify consistent patterns across varying timeframes?

• In what ways do these patterns' contextual nature shift as time progresses?

• Which creations have the inherent strength to prosper over time? Moreover, how do we measure success—is it through sustainability, compounding growth, or other metrics? And crucially, how can we nurture and amplify these successful outcomes?

Mood Board

The essence of a business is crystallized in the agreement and execution of an exchange between two or more entities. Its growth hinges on two critical drivers: achieving economies of scale and reducing transaction costs. In this context, our focus sharpens on scalable venture opportunities, particularly those propelled by technological advancements.

Inspired by Maslow’s hierarchy of needs, I drafted with this mood board as the hypothesis base:

Explanatory notes

• Need: This refers to the essential requirements of human beings, which may or may not be satisfied depending on the current state of development. These needs shift gradually with demographic changes. For simplicity, I've distilled them into three layers: Access (providing readily available, high-quality resources), Efficiency (ensuring stable and growing utility), and Experience (delivering elements of inspiration and imagination).

• Value: System value emerges when a need is met by a solution, with its worth defined by the utility it provides to the end customer. This value is distributed among all stakeholders in the value chain, including end customers, solution providers, suppliers, and others. Business value, on the other hand, refers to the portion of this value that a specific business entity captures.

• Price: This represents the average investor's assessment of a business's value and manifests as the agreed-upon value exchange in the market at a particular time. Price is also influenced by factors beyond business fundamentals, such as the relative attractiveness of assets, sector momentum, country risk, and more.

• Interface: In this context, 'interface' encompasses the total product or service experience that delivers the creation to meet people's needs. This can include a variety of forms such as consumer goods, hardware, software, community events, among others.

• Mechanism: Within this discussion, 'mechanism' refers to the processes and systems of agent interactions over time. The primary emphasis is on scalable feedback loops (achieving more output with less input) within the interface. Examples include network effects, economies of scale, power law effects, emergent properties, and others.

• Norm: This term denotes the socially accepted standards or perceptions that prevail among specific groups, which can vary widely across different social contexts and groups.

Hypothesis

• Scalability potential of technology-driven creations: These can evolve into scalable businesses within a certain timeframe when they:

  • Address genuine human needs effectively.

  • Offer a user-friendly interface bolstered by a robust feedback loop mechanism.

  • Align with the pricing dynamics of their target asset class, if they require external funding.

• Specific opportunities got me interested:

  • Emerging or regenerative infrastructure for humanity continuity

  • Bottom-up marketplace tapping into overlooked resources and communities

  • Tools that demystify complex concepts, encompassing open-source software, data infrastructure, developer tools, and ML/AI applications, thus enabling a broader audience.

  • Innovative networks fostering knowledge exchange and collaboration, underpinned by a talent-driven incentive model.

  • Community-centric redesigns of traditional systems in sectors like finance, enterprise, healthcare, and urban infrastructure.

  • Trusted brands with strong reputation for quality and integrity

Ongoing Questions

This is just the first draft. The following are questions I am still brewing and will update once I have more clarity.

Q1: How have human needs evolved?

• Human needs often undergo evolution across stages of access, efficiency, and experience. The question arises: when do individuals progress through different stages of needs?

• At times, needs do not follow a linear progression through the three stages. It is important to understand when and why people change their preferred conditions.

• What are the similarities and differences of behaviors of the same need stage across different social and cultural groups?

Q2: Connecting interface and mechanism?

• The instances of interfaces and mechanisms cited are based on observations of scalable products and business models from the past and present. Are there notable examples that have been overlooked?

• What new forms of interface and mechanism might surface in the future, potentially spurred by advancing technologies?

• How do interface and mechanism interact with each other throughout different stages of development? What are the key signals and metrics of positive feedback loops?

  • Product market fit?

  • Scale?

  • Long-term competitiveness?

Q3: What are the inflection points when new norms are formed?

• We often take norms as granted. How are norms formed? Evolved? Replaced?

• What are the similarities and differences in norms across different social and cultural groups?

Thanks for reading. Brewing continues.