The _____ Economy

Ever notice how there is always a new “The _____ Economy” trending?

It started with The Information Economy in the 90’s. Since then, every couple of years there is a refresh. Just in the last 10 years we’ve seen The Attention Economy, The Sharing Economy, The On-Demand Economy, The Crypto Economy, The Creator Economy, and The Ownership Economy all become real categories.

Right now people are pushing hard on The Community Economy, The Circular Economy, The Climate Economy, and The Curator Economy. And that’s just the C’s!

If this isn’t a trope then I don’t know what is.

But while the instinct might be to roll your eyes at the lack of creativity in tech/VC marketing, there is a lesson in its incredible longevity. It’s worth understanding why this turn of phrase persists and what it means for both founders and investors.

Let’s look at both parts: the “_____” and the “Economy”.

It’s the economy, stupid

We start with the inevitable endpoint: an economy.

I learned a lot of interesting lessons during my time at Andreessen Horowitz. Like all good lessons, the most important ones were sitting in plain sight. My favorite was at the tail end of a meeting with a new childcare marketplace (think Airbnb for daycare) as the founder was showing the earnings bump that people got by switching to this solo-preneur model. Jeff Jordan — who’s been involved in everything from eBay to OpenTable to Airbnb — said off the cuff “the secret to everything I’ve done, and it’s not a secret, is economic empowerment. It is building things that help people make money.”

In the end, maybe the most relevant question for founders and investors is simply whether something has “The _____ Economy” potential.

Nearly every big platform hits escape velocity by helping people make more money. So if a platform can’t (eventually) see itself operate as the central node in its own economy helping people make money, then there could be a disappointment in its future. In the end, maybe the most relevant question for founders and investors is simply whether something has “The _____ Economy” potential.

The confusing thing is that these platforms don’t always always start out that way. Some companies raise a lot of money and have a functioning, if massively subsidized, economy from day 1. Uber — with billions in VC funding helping to offer drivers guarantees right from the start — is the classic example here. Current day creator funds attached to large creator platforms are another example. Many crypto projects are doing it these days by raising money from their communities to help subsidize projects and attract users. But in the grand scheme of things this model is risky in that it obscures the true state of the “economy.” It is also limited in that not many founders/platforms have millions (if not billions) at their disposal to subsidize an economy from day 1.

The other path is to start with incentives other than money, then eventually transition to an economic model. Lots of consumer platforms — everything from Instagram to Youtube to Twitch — didn’t start out as ways for people to make money. They were initially about fun, status, connection and/or fame. They initially started as social networks, but as each grew their users realized they could build income off of them, which changed the trajectory of the companies. Early Airbnb hosts were city guides as much as hoteliers, but eventually it became about the economy. Most social networks became “creator economy” platforms over time. This is happening in many crypto communities right now: at start it’s about access, status and community, but over time it slowly shifts to floor prices, ATHs and economic potential.

Regardless of where you start, it seems that all successful roads eventually lead to economic empowerment.

But if everything ends up as a tool for helping people make money, then why do some take off and some don’t? That brings us to the second part of the phrase.

What the “_____”?

The second part to a big category is the “blank”. This part is more ephemeral. It’s more emotional. It’s more “Next Big Thing”-ish. It’s about what is in the current zeitgeist and how can that be built on in an authentic way.

It’s worth clarifying upfront that this isn’t about the value proposition of a particular product — all products still need to solve a real and specific problem. This isn’t even about the value prop of the category — that’s what the ‘economy’ part is for.

The “_____” is the rallying cry. This is the part that makes people aspire to join the movement when the economy is still nascent.

• At the start of the aughts, heavily mission driven companies and ‘tech for good’ was a common attitude. People wanted to see that a startup wasn’t just going to make them rich but also make the world a better place. How many cheesy recruiting pitches ended with some mediocre version of “Do you want to sell sugar water for the rest of your life or come with me and change the world?” From that vibe came the sharing economy. What better idea than “sharing” things I had sitting around to build a more sustainable future (and if I made money then that’s even better.) The sharing inspired … until the economy paid the bills.
• As the decade went on, building things that could amaze friends with style and simplicity took hold. Building something ‘friction-less’ became the trend. The ‘on-demand’ economy exploded and came to encapsulate everything from Instacart to Doordash. Eventually the economy trumped the ‘on-demand’ piece and now they’re most frequently talked about as in the context of jobs and employment. “On-demand” was the start, until the economy took over.
• Then the “creator economy” hit. Who didn’t want to become a creator? Not only was there the potential for fame and connection to a community, but it promised the creative freedom that most people want from their life. Now it’s a career path.
• Vitalik famously said “even a billion dollars of capital cannot compete with a project having a soul.” At the start of the crypto economy there was no economy.  The crypto portion - and correspondingly, why decentralization matters - served to capture the vibe before the crypto ‘economy’ was making people financially independent.

This isn’t to say that everyone survives. For every successful “The _____ Economy” there are dozens that fail to take off. Sometimes failure lies in the execution or value proposition of the specific startup. But it can also be because the “_____” fails to inspire and motivate people before the economic incentives arrive.

The next _____ economy

For better or worse, “The _____ Economy” isn’t going anywhere. It isn’t going anywhere because in its structure is the playbook for building an enormous and successful platform.

It represents the short term and the long term for any platform. It represents two of the more important questions people can ask themselves when they’re evaluating an idea:

• Are you building something that (at least initially) is fun/cool/interesting enough to inspire and motivate people?
• Are you building something that can sustain a real economy and help people make money?

I guess the question left is: what’s the next “The _____ Economy”?

D’Arcy Coolican is an angel investor, former investment partner at 16z, and founder of Frank Inc. This post originally appeared on his Substack. Subscribe for more great posts like this.