From the Pyramid to the Rectangle

We began this series with an essay titled “The smallest market is about to become the largest market.” It maps Maslow’s three-tiered pyramid of human needs - with basic needs at the bottom, social needs in the middle, and self-actualization needs at the top - onto the global economy - with the largest market for products and services addressing needs at the bottom and the smallest market those on the top. It argues that the economy is undergoing a transformation that will result in the pyramid inverting, such that basic needs will eventually represent the smallest market and self-actualization needs, the largest market.

It’s a simple argument with sweeping implications, which I have been busily unpacking. One of the questions it presents us with is: what does the transition look like? Yesterday the economy was a pyramid. Someday it will be an inverted pyramid. Meanwhile, for today and tomorrow and tomorrow’s tomorrows, we are in-between, in a state of becoming, undergoing that geometric transformation: from the pyramid to the rectangle, the half-way point, then from the rectangle to the inverted pyramid. The bottom is shrinking and the top is widening, a little bit every day.

In this post, let’s focus on the middle of the pyramid. If the bottom is shrinking and the top is widening, what about the middle?

In the last ten years, the middle of the pyramid expanded dramatically.

Whereas the struggle to survive once consumed nearly all of humanity’s time, energy and money, technological progress has driven down costs, which now allows a significant and increasing percentage of us to meet our basic needs with relative ease. According to Maslow’s hierarchy, once people have those needs met, they move up to the middle of the pyramid, and focus on their social needs - there is demand.

For all that demand, until recently there was no supply - it was a big opportunity. Go back just twenty years, circa 1990. If you wanted to connect with people, you had to write them a letter, or call them on the phone, or fax them. Or something like that? Actually, how did it work? I don’t remember, I was just a kid. Anyways, it took a lot of effort, so you interacted with fewer people, and mostly just those who were physically nearby.

What if you wanted to start a dating service back then, in those dark ages before the internet - how would you do it? Off the top of my head, I suppose you could advertise singles dinners in local newspapers and then charge admission for whoever showed up. But that’s just… awkward. Today, there’s Tinder and Grouper. They’re awkward too but at least they’re convenient. Not that I’ve used them, of course.

Fast forward another ten years, to the early 2000s, and email is becoming fairly ubiquitous, chat services are becoming popular, people are using forums, etc. Still, the internet was in its infancy, and websites were pretty basic and utilitarian. Today, there’s Facebook, LinkedIn, Twitter, a dozen smaller networks, and scores and scores of apps that provide social services or social-enabled services.

There has been a revolution. For all the hype, and there’s been plenty of it, often I have to remind myself of the magnitude of it. It’s not as if this market for social products and services grew steadily, year-over-year, over several decades. It exploded into existence, with most of the big businesses built in just the last eight years, although it felt as if it were overnight.

I wonder if, twenty years from now, citizens of the future will look back and marvel. Perhaps we don’t have enough historical context to realize how significant these inventions are in the scheme of civilization’s march through the millennia.

What does this show? Before the internet, the bottom of the pyramid was huge and the middle of the pyramid was small, barely larger than the top, which was tiny. Now, there’s a large market, with big publicly traded and privately held companies, which we all know and whose services we all use. These platforms, in turn, power whole ecosystems of small and medium-sized businesses.

In comparison to the bottom, is the middle of the pyramid a big market?

On the other hand, perhaps we’re too credulous, and this is all over-stated. Facebook, Facebook, Facebook… all anyone - in tech, in the media, especially in our generation - can talk about, as the day is long, is Facebook and Twitter and the rest of it. When a new app comes along that we like, we say, “Oh! Check it out! This is going to be HUGE! They’re going to CRUSH IT!” We’re users, so our perception of size is skewed. We think they are big, but maybe they are just big for what they are, silly little websites and apps, and when put in the context of the global economy, actually quite small?

Maybe it’s a gold rush. We’re all up and leaving. Leaving our homes and moving West. Moving by the wagon. Every train, full. But when we arrive, what if there’s not much gold? You’ll be stuck out there. And broke. That’s okay if you’re in California - you’ll survive, and maybe, eventually, thrive. But it’s dangerous if you’re in Alaska.

There was no money to be made in gold. The fortunes were made in railroads. In construction. In infrastructure. Good livings were made running general stores, hardware stores and saloons: selling shovels, kerosene, denim, sandwiches, whisky. Food, water, shelter, energy, transportation. The bottom of the pyramid. Stay low, look for scale.

We are capitalists. We are investors and entrepreneurs. We are chasing gold. Where is the next fortune going to be made? We need to know!

If “social” is the gold rush of our age, don’t try to build the next Facebook. Try to build the next Comcast. Sell bandwidth. Or try to build the next Github and sell shovels. Think unsexy. Think infrastructure. Think must-haves.

Don’t git ahead a yerself ye’ lil youngster, there ain’t no gold in ‘dem hills!

On the other hand, maybe there is gold in ‘dem hills.

Well, is there?

The numbers concern me. Let’s add up the value of all of the social media companies.

Facebook IPO’d at $100B, we’ll go with that. LinkedIn is worth $20B. Let’s give Twitter a $10B valuation. There are plenty of others - Pinterest, Spotify, Tumblr, Path, Klout, RenRen, Zynga, Wordpress, Reddit, the big dating sites, etc. Let’s leave the research project of compiling and valuing an exhaustive list to someone else. Instead, let’s clump them all together as “Other”, give them preposterously generous valuations and multiply those by whatever number we need to, to wind up with another $70B. Add all that up and it’s still only $200B - in market value, not revenue! That may sound like a big number, but here’s a bigger number: world GDP is 70 trillion. These businesses are a tiny fraction of the world economy.

Why is that? Is the middle (and top) of the pyramid economically insignificant?

No. There was gold in ‘dem hills. Here are three reasons why the middle is economically significant:

First, the social economy is much bigger than just social media. Even before the internet, there were social businesses. Human beings have always had social needs: for connectedness, love, respect, understanding, intimacy, admiration, etc. Needs are needs. They will be met. Technology just makes it easier.

Events, parties, book clubs, meet-ups, plays, operas, symphonies, concerts, bars, nightclubs, churches - all of this economic activity adds up. Lots of small businesses. How big is this market? Hard to say. All of this activity is micro and local, and thus, basically invisible. As platforms like Meetup, Eventbrite, Ticketmaster, Foursquare and even social-enabled payments services, like Square, gain more market share, it will be easier to quantify and track all of this real-world social activity. They will start to surface the who, what, where, when, why, how and how much.

Some giants too. Telecom (communicating), publishing (sharing ideas and information) and media & entertainment (sharing stories and emotions) all cater to social needs. They cater to other needs as well, but I think they are primarily social and should be classified as such.

These giants have a history. As with all old things, it’s easy to forget that once, they were young. Publishing, of course, as a technology, goes back to Gutenberg in the 16th century, but as an industry, began with small publishing houses and ultimately matured into the [Big 4]( In the 1870s, Alexander Graham Bell invented the telephone, patented his invention, formed the Bell Telephone joint-stock company, which commercialized the technology and quickly became a giant. Los Angeles was the birthplace of the modern entertainment industry, not that long ago, with the golden age of classical Hollywood cinema beginning in the late 1920s and lasting into 1950s. The remarkable phenomenon of the emergence of a global culture, where consumers in far-away lands, with extremely different cultures, somehow acquiring a taste for American stories, was a large part of its success.

We capitalists, we forget. We forget the capitalists that came before us, our economic forebears. Had we been born in their era, had we been asking the same questions - “Where is the next fortune to be made?” - we would have been fortunate to rush to ‘dem hills, to play our part in the formation of these industries. They were so bold, so daring, so visionary. These businesses were young once, and small.

As we disrupt them, as they crumble, we laugh - a haughty scornful laugh. We call them smokestacks. They are ancient. They are conservative. They don’t like change. They don’t want progress. Bookstores? Ha! Download. Records? Ha! Here’s a thousand songs in your pocket. Newspapers?! Use Flipboard.

Anyways, I digress. The point I am making is that the social economy is larger than it may seem, and all of these industries are a part of it.

Also, businesses outside the social economy, at both the top and bottom of the pyramid, benefit from its growth. Airbnb, for example, caters to a basic need: accommodation. But it’s a social-enabled business, that is based on trust and recommendations and “collaborative consumption”. Everest does not primarily focus on social needs, we focus on self-actualization needs, but it becomes an important part of our user’s social identities and all sorts of connections happen within our community. Or, another example: transportation is usually classified at the bottom of the pyramid, but when you fly back home to see your parents, that airline company is benefiting from social dollars.

Second, social is more efficient than basic. Yes, the “basic needs” economy is just way bigger than big, so the numbers are staggering. Think about all that goes into it. Agriculture, energy, construction, mining, forestry - these are humongous global industries. Every farmer, every plumber, and on and on - in the whole entire world! In comparison, social services are more efficient. It requires less labor and less capital to build an online global network than to lay fiber optic cable across the Pacific. That doesn’t mean it creates less value. It just means that there’s more consumer surplus, and less profits relative to the value being created.

Thirdly, it’s not size that matters, but rapid value creation. The absolute size of the “social needs” economy doesn’t matter, relative to the rest, as long as that’s where all the surplus is going, growth is coming from, wealth is being created, and profits exist. Coca-Cola, for example, sells products that address basic needs. It exists in that vast portion of the economy at the bottom of the pyramid. Look at its stock chart. It’s basically where it was ten years ago, providing stable dividends for its shareholders. Sure, it’s huge - $188B market cap, two and a half times Facebook’s current value - but would you have rather been an investor in Coca-Cola or in Facebook over the last eight years?

The growth in social came from big businesses.

A capitalist, whether an investor or an entrepreneur, is a fortune seeker, and fortunes require either huge margins or huge volume, and ideally, both. With a small business, you’re unlikely to get either. That’s why, to the capitalist, a thousand small businesses are boring but even one big business is exciting.

There are three exceptions to this, and they all prove the rule. If the thousand small businesses are, or could become, a franchise, that is exciting, from the point of view, of course, of the capitalist becoming the franchiser, not a franchisee. If the thousand small businesses all need the same thing, or even better, things, that is exciting, especially if those things have huge margins or huge volume, and ideally, both, because, of course, the capitalist might be able to build a big business that sells them. And lastly, if the thousand small businesses can be consolidated into one big business, through mergers and acquisitions, then that is, of course, also exciting to the capitalist, who can start a private equity fund.

Small businesses are boring. Big businesses are exciting. Small businesses subsist - they afford their owners a living, or at best, a lifestyle. Big businesses profit - their owners accumulate capital.

Historically, small businesses have comprised the bulk of the economy’s activity, but a fraction of its profits. A sign of progress, of a mature free-market economy, is not only competition, but consolidation. Consolidation allows for scale. Scale creates efficiency, which is either passed on to consumers in the form of lower prices, which creates consumer surplus, or is retained by shareholders in the form of higher margins, which accumulates capital. The less competition in a market, the more likely the latter.

The accumulation of capital is, of course, what capitalism is all about. As that capital accumulates into larger and larger pools of wealth, it seeks returns. So its owners invest in various funds, and those funds have managers, and those managers are rewarded for returning interest on that principal, and they do that by investing in profitable opportunities throughout the economy, which include debt, equity, and other assets. So up and down the risk spectrum, there are venture capital funds, investing in startups, private equity funds, creating efficiencies through mergers and acquisitions, debt funds, investing in corporate and government bonds, and public equity funds, which invest in stocks, etc. etc. etc.

Adam Smith wrote: “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” In the same way, all of this activity across the capital markets ultimately results in our dinner, if you will, continuously getting better, bigger, and cheaper.

In the last ten years, the middle of the pyramid expanded dramatically. Remarkably, the expansion was consolidated. There were a relatively large number of big businesses created worth more than $100M, and a relatively small number of small businesses. The reason for that is that most of the businesses that were formed to go after the emerging opportunities in the social economy were venture backed, so they had to either fail, get acquired, or become big fast - the one option they did not have available to them was to languish as small boring lifestyle businesses. They just weren’t set up for that.

This particular quality made it especially attractive to capital, seeking return on investment, and capitalists, seeking fortunes by building big businesses. Imagine, for a moment, the opposite scenario, and you’ll see why. What if, in the last ten years, the middle of the pyramid expanded dramatically, but all of the growth came through the formation of millions of hard to scale, hard to consolidate small businesses? It would be far less attractive as an investment space.

The first industries required lots of capital and provided an attractive returns on investment were all basic needs businesses. First, there were the seafaring merchants. To finance these ventures, they had to invent joint-stock companies and insurance, and it is to these inventions that the City of London traces its lineage as a modern financial center. Then, skipping over a few chapters, there was the railroad industry in the 1870s. Capital from British and French investors flooded into New York, giving rise to that city as a financial center, to finance the railways.

The social economy is still much smaller than the basic economy, but it is getting larger and providing more opportunities for capitalism. It has always employed countless small businesses. In the 20th century, at least three giant global industries emerged - telecom, publishing, and media & entertainment - that addressed social needs. As people had more surplus to spend on these needs, more dollars also went to basic services, like transportation and accommodation, but these dollars, even if they are hard to quantify, should also be classified as part of the social economy. In the last ten years, many of the biggest fortunes were made in social, as new startups emerged to both disrupt the old giants and to create entirely new industries. Those new startups created market value rapidly and became big businesses, resulting, as we have already noted, in a dramatic expansion in the market and, just as importantly, in excellent returns for the winners, both investors and entrepreneurs.

The growth in social came from big businesses. If it had not, it would have been far less exciting to capitalists, both investors and entrepreneurs. If, in the same period, there were more opportunities to form big businesses at either the bottom or top of the pyramid, capitalists would have gone elsewhere.

Is it still worth investing in the middle of the pyramid?

The whole economy keys off of return on investment.

Where is the next fortune to be made? Where is the next big business to be created?

These are two questions that capitalists ask.

We have surveyed the social economy. Ten years ago, it was much smaller. Now it’s so big that people are quitting the internet just to get some fresh air. So much was created in so little time. There is an over-abundance of supply.

Facebook dominates the landscape. It is a creative monopoly and it is entrenched. Network effects protect the social graph from disruption.

Facebook created nearly an order of magnitude more wealth for investors than the nearest big social businesses, and it’s hard to see where the next entrant of that size, or even the next size down, will come from.

That’s why I am bearish on the middle of the pyramid. I don’t think it will shrink or that growth will stop, I just think it will slow down and under-perform the bottom and the top. I think most of what can be done, has been done - for now.

Ten years ago, this market entered a phase of rapid creation. Everywhere capitalists looked there was a new fortune to be made, a new big business to be founded, a new product to be invented, a new market to be created. Maybe this is hindsight playing tricks on me, but I remember, as an avid teenage consumer, eagerly awaiting the next big website or app that would create something totally new for me. There was this sense back then that the internet, then mobile, when the iPhone came along, was a wide-open opportunity, a blank canvas. Now, there are less opportunities, and they are, on the whole, less obvious, more crowded, and smaller - so the bar is much higher for capitalists seeking their next fortune.

This market is exiting its creative phase and entering its disruptive phase, and in the meantime, there will be a bit of a lull. Everything is still so new, so it’s hard to come out with a competing offering that does the same thing dramatically better or more cheaply. Also, in a market where all the biggest businesses are networks, network effects will protect the incumbents.

In the periphery, there will still be plenty of innovation and investors will still make bets, they’ll just be playing a different game. Big companies will need infusions of fresh talent and new features, so they will acqui-hire (effectively outsourcing HR and R&D to startups), and if a startup poses enough of a threat, especially to a core business, they can afford to pay as big a premium as they need to acquire them.

After an acquisition, game theory logic takes over. If the acquirer is the largest player in a market, they’ll shut down their acquisition because they don’t want to disrupt their own business. If the acquirer is one of several large players in a market, they may choose to disrupt their competitors to gain market share, even if margins will be smaller when they’ve forced them out, because they’ll effectively be shrinking the market by squeezing profits out - that’s what all disruptive services do. Or, of course, if the acquisition can supplement the value of an existing offering, or replace an existing offering, without reducing revenue, the acquirer will just integrate it.

Who becomes valuable in this sort of environment? Either people with existing relationships with corporate development teams, who have insight into what corporate buyers need - because, on the margins, much of the trick will be convincing corporate buyers that the startup in question is actually valuable or threatening, and enough to pay a premium for - or, really savvy product teams who can keep launching consumer applications one step ahead of everyone else, with enough of a lead to build some sort of barrier to entry.

An app comes to mind. Brewster is my favorite contacts app. It integrates with all of my social accounts and contacts databases, so it keeps my contacts up to date, displays them beautifully, suggests people to stay in touch with, and keeps me informed of updates in my network. It’s far better than the alternatives, so it offers more value. It is getting better with every update, so I am sure that someday, not yet, I’ll say it is dramatically more valuable, but for now, it is at least a noticeable and appreciated improvement in my life. It does not offer less cost, because the cost of Brewster is the same as the cost of the alternatives, which is free. So, is Brewster disruptive? Not yet, at least not in the classic sense that they are offering dramatically more value for less cost (or, more value for dramatically less cost). Another way of putting it: it’s not disruptive because there’s nothing to disrupt - I am not currently paying for any contact management services, so it is not displacing any purchase. Brewster’s competitors are part of larger offerings that I am paying for, that I won’t stop paying for, no matter how good Brewster gets: for example, Apple’s Address Book is a competitor, in a sense, but it is part of a much larger value proposition, an operating system and device. Is Brewster creating a new market? No, the market for contacts organizers already exists.

If Brewster is neither disrupting or creating a market, what is it? It is making an incremental improvement to an existing market. They are clearly an acquisition target. Their team probably costs a million dollars a year or so to run. That’s capital efficient enough for them to make sense as an investment if their investors get in at a low enough price (I have no idea what they raised or at what price, but let’s say $3M on a $4M-pre) that any acquisition over $20M is a good outcome, especially if it happens relatively quickly, say, within three years (with the numbers I just threw out, a $21M exit price would be 3X on a post money of $7M, returning 100% a year on capital). The investment thesis is pretty straightforward, because there are lots of very obvious potential acquirers with lots of cash and contacts are an important feature set for them.

It’s interesting to think about what it would take to make Brewster a viable independent business. What premium features would they need to introduce, how valuable would they need to be, how much would they need to charge for them, and how many people would need to be willing to pay, for them to build a monthly subscription business large enough for them to make $1.5M a year in revenue? That’s roughly the minimum they’d need to keep the business running, given my best estimation of their costs and the 30% cut that Apple takes, unless they can get around that. Then, how much would they need to grow in order for them to make enough profit that their investors have an outcome that justifies their initial investment? Risk capital is expensive, in exchange for illiquid patience, it expects a high return. To get the same 3X, they’d need to generate $21M in profits and instead of re-investing it into the business, pay it out as a dividend. (That’s obviously not what they’d do in that scenario, because if they were able to generate $21M in profits, they would in fact have created a new market, for paid contact organizers, and depending on how quickly they were growing, they could either re-invest the profits, or seek an acquisition at some multiple.) The bottom line is that Brewster would have to achieve wonders as an independent company to result in the same outcome for investors as an early, easy acquisition.

Going back to the acquisition scenario: turning $3M in capital into $9M in 3 years. This is great for a small fund, but it’s not great for a big fund. It’s too capital efficient. You’d have to do 100 Brewsters to deploy a $300M fund. How many Brewster-like opportunities are there? Acquirers can only acquire as fast as they can. Even if they have plenty of cash on their balance sheets, there is only so many deals they can do in a year. So, smaller funds have emerged, deploying less than $100M, investing in 30 or so apps with Brewster-like investment profiles, but there aren’t that many of them, because there’s only so much acquisition demand at the end of the tunnel to absorb all the supply they’re creating.

From a capital markets perspective, the problem with all of these scenarios is that they don’t cater to the traditional venture capital model. They are less risky, small wins.

The iconic traditional funds were built on $100M, $1B and > $1B exits, and their biggest wins were independent companies which gave them liquidity through an IPO. Only a few companies in any portfolio would achieve those outcomes, but they would return the fund.

Will there be any opportunities on that scale to address social needs in the next few years? There may be one or two, if that. Not enough to build a thesis for a fund around.

(I could be wrong, of course. Even if investors agreed with me, it’s up to entrepreneurs with great ideas to prove them wrong. The problem is that it’s far easier to prove investors right. If they’ve got a big idea, show it to them.)

I’ll pick a winner: Glide. Add it to my shadow portfolio. I think it could be big. How big is less clear to me. But I think it could hit the $100M+ range.

Anyways, what is Glide? They describe themselves as a video walkie-talkie. You broadcast video messages to your friends, which they can watch and respond to at any time. I use it to stay in touch with my mother instead of exchanging text messages or phone calls. Unlike Facetime, you don’t need to be on WiFi, so you can use it anywhere, and you don’t both need to be using it at the same time - it’s asynchronous. When both people are using it at the same time, it’s nearly synchronous. It makes me smile! It brings me closer together than I’ve previously been able to be with people that aren’t physically nearby.

I am not privy to any of their numbers, of course, but I think they’re growing at an amazingly fast rate. It’s a viral product. To use it, I have to bring in others. I think I’m responsible for bringing almost twenty of my friends into it. I use it regularly. Always weekly, sometimes daily, sometimes throughout the day - it varies. So they’ve got growth and engagement.

Monetization is tough. But honestly, I don’t think it matters if, and this is the crux of it, if they are defensible. How much time and money would it cost to release a competing offering? Is there any technology that’s particularly hard to build? Any IP? Do network effects matter? My guess is that, depending on how viral they are, network effects can protect them from other startups that try to do the same thing, but it probably can’t protect them from Google or Apple or Facebook, because they already have distribution. At that point, the questions become: how much do these companies want to enter this market, how much easier would it be for them to acquire Glide than build it themselves, and how badly do they not want their competitors to have it? Under the right circumstances, with the right timing, they could create a frenzied auction environment and sell for silly money. Ideally, this would happen after they’re in the 30M+ user range. If it happens sooner, the outcome will be smaller.

If Glide had a clear and obvious path to monetization, it could be a tremendous independent business and see a much bigger outcome, but I can’t think of a path for them there (again, doesn’t mean there isn’t one).

Here’s one more example.

Goodreads, a social network for books, which was backed by True Ventures (a relatively small fund) and recently acquired by Amazon for $150 million. That’s a great exit, given that the startup only raised $2.75 million.

Back in July 2011, I wrote a blog post calling for a Goodreads for movies. A social network for movies makes sense. A few months after writing the post, I began advising a startup called, which had designed a gorgeous product. Unfortunately, it wasn’t able to raise money. Neither IMDB, Flixter or any of the existing players in the movie are investing heavily in the opportunity. There are two startups that I am aware of in the space, MovieLaLa and Letterboxd.

I use Goodreads, but I think the product could have been, say, three times better. The question is, if it had been, how much would it have changed the exit value? Would it have been less than, equal to, or greater than three times more valuable to Amazon?

If somebody gets the “social network for movies” idea right, and it is three times better than Goodreads, maybe they can sell for even more than $150M. But I think that it would take extraordinary execution for that idea to jump an order of magnitude and become worth near or north of a billion dollars.

There could be several scenarios which look like this - big acquisitions, with anything over $100M being a home-run. Will there be enough of these companies to build a fund around social needs? No. That was the last five years, I don’t think it will be the next five years.

If I am, indeed, suffering from hindsight, then perhaps there are just as many, if not more, opportunities to build big businesses in social as there ever were, and I’m just not seeing them, because they haven’t been built yet. For example, another one just came to mind - social commerce is big. You have new entrants, like Luvocracy, trying to re-orient our buying habits around our friend’s recommendations. But I think this is just another exception.

Another exception is Google Glass. It’s a new platform, so it’s hard to say how big of a company could be built on a successful application, and whether there will be opportunities to create new applications that powerfully address social needs in ways that weren’t possible before. There’s no denying that it’s an exciting technology and I think that KPCB, A16Z, and Google Ventures were smart to set up a fund around it. They’re going to get all the deal flow for now. Other investors probably shouldn’t compete with them yet, at least at this early stage, because they have an insider advantage. The opportunity is still wide open for entrepreneurs, though, so go for it, if you have a vision.

Come to think of it, there may be quite a few “another exceptions…”, and maybe that’s how investors will invest. They won’t have a thesis around social, but they’ll be opportunistic when they see something promising - like Benchmark’s $13M investment in Snapchat. That sort of activity doesn’t shake the larger argument that most of the opportunities in the next few years or so will be found elsewhere.

The overall posture, then, towards investing in social startups will be, and should be, bearish. Ironically, this does not have to be a bad thing for entrepreneurs in the space. They can be the exceptions that prove the rule. There will be less competition for dollars and attention. But, on the other hand, there will be less dollars and attention to compete for. It sort of depends on whether you prefer to convince investors that they are wrong, which is hard, or you prefer to convince them not only that they are right, which is easy, but that your company is the best of all possible investment vehicles for them to express their position, which is easy when there isn’t excellent competition, but hard when there is.

So at the end of the day, from the perspective of an entrepreneur who has a business idea that they passionately believe is going to be big, then maybe this is a moot point. Because, even if this argument is correct, and the social economy won’t have many big opportunities for growth in the near future, and capital and capitalists will be leaving the space, it doesn’t matter. Because you see something the others don’t and you think you’re going to be the exception. Some runners run uphill races and win. Others prefer their odds downhill or on the flats. Choose your race. Just be aware of the economic context in which your business will exist.

In conclusion…

We are going from the pyramid to the inverted pyramid, by way of the rectangle. This means that for capitalists, for investors and entrepreneurs seeking to build big businesses, there are opportunities at both the bottom, to disrupt, and at the top, to create, but the middle, the market for social needs, which exploded into existence recently and was so exciting only a few years ago, should be avoided for now, because it will basically remain flat.