I specifically liked lesson #3 on Value Chains and Profit Pools.
a) Every industry has a “value chain.”
b) Every industry also has a “profit pool.” Everyone in the value chain is trying to extract the largest possible share of the profit pool for itself.
Here Griffin introduces the concept of "wholesale transfer pricing".
"I heard John Malone explain this in ~ 1995:
Wholesale transfer pricing = bargaining power of company A that supplies a unique product XYZ to Company B which may enable company A to take the profits of company B by increasing the wholesale price of XYZ."
I would very much welcome a post connecting your "Five Stages of Denial" and "grit", and these 3 concepts:
1) Value chain
2) Profit pool
3) Wholesale transfer pricing
Also very revealing are the two diagrams where he captures the before and after situation in the music industry:
"In this new structure there are fewer businesses taking a share of the revenue from the profit pool and the share Chance the rapper (the artist) receives is higher".
It made me think that what Internet/digitalization makes in industries is:
1) Reduce the number of actors that can capture value.
2) Increase the amount/percentage of value captured by one of the actors.
Yes, this is very sharp reasoning from Tren, and I will definitely think about a post that connects the various dots. Maybe rewriting "The Five Stages of Denial" with updated reasoning/wording/examples—an anniversary edition or something like that :-)
I specifically liked his explanation that "music is a public good (which are both non-rival and non-excludable). If I make a digital copy of your digital music, you still have your music (the music is non-rival). If I steal your phone you will no longer have a phone (a phone is rival). Music becomes “excludable” if you move the musician’s performance into a theater, since you can exclude people from hearing the performance who do not pay. Lots of important industries like journalism have this public good problem. It is not a new problem and applies to things like lighthouses and national defense".
"The music business has responded to this public problem by shifting to complementary products that are excludable like concerts and merchandise sales. This works for musicians but is not enough to save the newspaper business since people will attend only so many conferences."
And another one from Tren Griffin (2018):
https://25iq.com/2018/09/01/lessons-from-chance-the-rapper-value-chains-and-profit-pools/
I specifically liked lesson #3 on Value Chains and Profit Pools.
a) Every industry has a “value chain.”
b) Every industry also has a “profit pool.” Everyone in the value chain is trying to extract the largest possible share of the profit pool for itself.
Here Griffin introduces the concept of "wholesale transfer pricing".
"I heard John Malone explain this in ~ 1995:
Wholesale transfer pricing = bargaining power of company A that supplies a unique product XYZ to Company B which may enable company A to take the profits of company B by increasing the wholesale price of XYZ."
I would very much welcome a post connecting your "Five Stages of Denial" and "grit", and these 3 concepts:
1) Value chain
2) Profit pool
3) Wholesale transfer pricing
Also very revealing are the two diagrams where he captures the before and after situation in the music industry:
"In this new structure there are fewer businesses taking a share of the revenue from the profit pool and the share Chance the rapper (the artist) receives is higher".
It made me think that what Internet/digitalization makes in industries is:
1) Reduce the number of actors that can capture value.
2) Increase the amount/percentage of value captured by one of the actors.
Yes, this is very sharp reasoning from Tren, and I will definitely think about a post that connects the various dots. Maybe rewriting "The Five Stages of Denial" with updated reasoning/wording/examples—an anniversary edition or something like that :-)
A bit oldie (2016), but this analysis from Tren Griffin is a good complement to your post:
https://25iq.com/2016/09/03/a-dozen-things-ive-learned-about-the-music-business-and-businesses-like-it/
I specifically liked his explanation that "music is a public good (which are both non-rival and non-excludable). If I make a digital copy of your digital music, you still have your music (the music is non-rival). If I steal your phone you will no longer have a phone (a phone is rival). Music becomes “excludable” if you move the musician’s performance into a theater, since you can exclude people from hearing the performance who do not pay. Lots of important industries like journalism have this public good problem. It is not a new problem and applies to things like lighthouses and national defense".
"The music business has responded to this public problem by shifting to complementary products that are excludable like concerts and merchandise sales. This works for musicians but is not enough to save the newspaper business since people will attend only so many conferences."
Thanks Jorge! This is great.