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Monday June 29, 2020 |Notes

The positive sum nature of digital products

Digital products are positive sum by nature. They enable more to be created and expand the digital ecosystem. This contrasts with the zero-sum nature of traditional real-estate, which is constrained by physical borders and regulations.

John Collison, a co-founder of Stripe, discussed this idea of technology as an ever-growing pie on a recent episode of Invest like the Best with Patrick O’Shaughnessy.

look at something like real estate, in many kinds of parts of the world, barriers to building mean that part of what makes it a good business is the fact that there’s a fixed number of assets that can be monetized.

part of what I find so exciting about technology by contrast is it is not a fixed pie that everyone’s looking to find creative ways to redo the capital stack, or do a roll up or something like that. But instead we can just create all sorts of new technology wealth and all sorts of new technology value

Another difference is how the value of any individual piece of real estate is largely constrained by outside elements, including the value of other properties. With digital products (website, app, software), the value is largely dependent on usage. There's no physical barriers to building a huge site on any domain, nor any zoning restriction on some types of websites.

The ability to grow and create more remains perhaps the most exciting aspect of developing digital products.