The fusion engine for progress (PULL applied to capitalism)

Hey Rob, welcome back. How you doing, man?

Good. How are you?

Good, good. Chilling, uh, back at corporate headquarters for, uh, another week. I'll be back in, uh, in Mexico here, uh, in a week and a half, but enjoying that beautiful Texas spring down here. What's, what's new up in New Hampshire?

Yeah, well, it's, we have had nice weather and it's apparently supposed to snow, so, uh, yeah, it's like, make up your mind.

That's hilarious. And also sounds like medium, low-grade hellish to this fragile Texan. Well, we are taking a break from our normally scheduled programming of helping entrepreneurs find product-market fit to detour into the land of defending capitalism and safeguarding its future for, for our children and our children's children. What's this week's post is called The Fusion Engine for Progress. The demand side of the future. And basically, we're going to get into some critiques that I think you and I have heard with our peer— from our peers that you specifically have heard from peers that we saw at Harvard that are kind of like in the public narrative. And also, I think, in a very interesting way, applying like taking the pull framework, which we discuss at a micro level, and thinking about how does that if we zoom out, is it a fractal? Like, does it also apply, you know, more broadly across, across an economy, across the system? And so Rob would love to start with just like, why is this on your mind? Like, why, why are we headed in this direction today?

Yeah, I think two reasons. But is fractal the word you just Googled? Is that the word?

It is. I got it.

I nailed it.

You know, I actually don't— I don't know if that's the right word. I'm like 73% sure, but I think a fractal means like what works at a small level also works when it's applied at a broad level.

Yeah, it works across scales. Yeah, yeah, yeah. I'm very proud of that word. That's a good one.

So yeah, like, I think it's a Nassim Taleb concept, if I remember correctly.

Anyways, he talks about it. Yeah. Yeah. So I don't know. So what are we doing here? We are basically developing a way of thinking about startups and thinking about business and thinking about roughly a way of thinking about zero to one. But that the way to think about Zero to One has implications for how businesses generally work, how sales generally works. Like this model that we are developing is a, it is like, I think the missing foundation for why and how businesses work. That's how I view it. That's what I think I'm doing. I could be crazy. In thinking that it is that important and that, that relevant. But I think it's actually a base model for why people buy things and why new products work, which also makes sense for existing pro— it has to make sense for existing products. If you can't explain why new products work, you kind of can't explain why existing products work in a, in a causal way. And so we're focused at that small level. And so, uh, that's fine. It's great. It's like super helpful. And I think it's, it's helped a lot of startups take off, but I think there are some bigger questions that this model can answer or some that it can, it can help us see the world in a slightly different way. I find that when people learn about demand, it's a new lens. They learn about pull. It's a new lens for seeing the world and for seeing their business. And so the thought was, okay, cool. I've been seeing this. I've been having these like conversations about capitalism that are just kind of like thrown at me. I don't go seeking them out. I just get, you know, I just get blindsided by random conversations about capitalism.

I'm just hanging out in Cambridge, smoky Cambridge coffee shops and, you know, close to the philosophy department.

Yeah, no, God, no. I am, I am in New Hampshire. I am with normal people, right? I am not, this is, these are not conversations with like, as I write in this post, one of probably my favorite line ever. This is, these are not conversations I'm having with, you know, like University of Berkeley professors of Marxist history, right? These are just normal people with normal jobs. Who are not like Ivy League eggheads, they're normal people. And they kind of, there's this valence of like capitalism is bad. I just get punched in the face with that every couple weeks when I'm just interacting with some normal person. And it's just caused, it's been in the back of my mind and it's, you know, it's something that I've probably heard forever.

Right.

I've probably heard complaints about this forever. And I was thinking about it and the pull framework and I was like, oh, this might have something to say about it. And so I thought like, that's Thing one. Thing two is this podcast and newsletter will probably get us both uninvited from reunion and I don't want to go anyway, so let's do it.

I kind of hope so. Yeah. You know, let me, I think let's start, Rob, if you're cool with it, let's start with just like the explanation. Like how does pull extrapolate to an economy essentially, or to a system? What does pull mean when we're not talking about me, Robert Carpenter, with my business trying to sell or trying to identify pull or demand or grow my startup or find product market fit, but instead thinking about it more broadly. I'm going to read the way that you open, you open this, this Substack. We are trying to do things in our lives that this trying to do things is what I call demand. As try to do things, as we try to do things, we sometimes find that we are blocked. We don't have the right methods or means or tools. Maybe existing tools are too expensive. Maybe they're not quite right. This is blocked demand, what I call pull. When there's pull, there's a space where a new thing could come into existence and unblock us. If it unblocks, if it unblocks us, we buy it. We keep trying to do things. We strive for more and bigger and better because striving is human. We get blocked as we strive and new space, new spaces emerge. The cycle repeats. Rob, can you, um, I, uh, I was trying to extract myself actually from, while I was reading through your, your post, trying to extract myself from like, you know, 18, 24, whatever number of months of having been exposed and influenced by your ideas to think like, how did I used to think that, uh, that capitalism worked at a micro level and then how that extrapolated to it. And I think I just, I, I like didn't really have it there. It was like people buy things, you know, invisible hand. There's a market that exists. I don't think it, I never made the connection, which is one thing you've helped with, which is what happens at a small level, which aggregates and how that aggregates to a much bigger level. But would love your thoughts, Rob, commentary on what does, what is the connection between pull and capitalism and other thoughts you have on like how this system works?

Yeah, I think so. Usually when you take like Economics 101, you learn kind of there's supply, there's demand, and there's the graphs go like that. People buy things, but like we don't actually learn that at the individual level and like what causes a person to buy a thing and what causes a new thing to come into existence. And so we, I think that is actually the level of analysis that all of this has to start at because otherwise you're dealing with like abstractions and like concepts of willingness to pay and, you know, likeliness to like willingness to produce and all those kinds of things, which are abstract concepts. They're fine, they're useful, but we don't understand the mechanism By which willingness to pay emerges, new products emerge. And if we don't understand that, that we don't actually understand the system, right? We could, we could talk about how people typically in their minds think about capitalism and, and how this works. But if you start at that level, right? Just that simple rule. I'm trying to do something in my life. I am blocked from doing it by my existing tools, methods, options. That those two forces that we've talked about for a year now create space for something to unblock me that I will pull, that I will buy, right? If that is the only thing you need to unders— that is the only rule I think you actually need in order to derive like how capitalism works.

Yeah. The, you know, for me thinking about supply and demand and having, you know, studied economics, it was like, yeah, the abstraction of what is the volume of steel that the United States would consume like in a given year. And it's like that idea exists that it was like, if you would've asked Why does that— why is that the level? I would've had a really hard time drawing it, but it's like the job or the, you know, the demand in that case, the thing that's blocked is like probably construction primarily, or, you know, creation of durable goods. And each one of those individual decisions has, you know, this trade-off, this decision on, you know, what are my options? What's the best option? What's the most economic option? And like understanding it from there as 100,000, 1 million, 10 million different individual decisions looking to unblock the construction of a building, looking to unblock the construction of a car, the development of a factory, and how that relates to individual pull. Yeah, like that's the way, the direction my brain goes when trying to make sense of this.

Yeah. Yeah. And I think it like makes sense to say, okay, cool, this thing that I've described, this kind of pull thing is human. Right? We're all trying to do things in our lives. We, and everybody who has ever existed basically has been trying to do things as they go about time and they've been blocked. They just haven't been able to do the things they wanted to do. And those spaces have always emerged. They've always been there. The question, like, but it's, that doesn't mean that a product just comes into existence. Somebody has to see that space and say, All right, cool. I'm going to put something to fill that space. And there has to be a reason for them to do it, right? It's not easy as we, as everybody who listens to this, but probably, you know, they, they don't understand this in the faculty lounge and in the, you know, sociology department at wherever, but like everybody who listens to this knows how hard it is to build something that people will buy and use, build something useful.

Yeah.

There has to be a reason to do it or it just won't happen. And what capitalism does is it creates the incentive through property, right? Through, through like a money system. But, but it's basically like, I now have an incentive to build something useful that fits in that space. Everybody has that incentive to do that thing. And when we do that thing, we get better off. We get unblocked from the things we want in our lives because now we have money. We have, right? Like now we have whatever, right? And, and that's a, it's a, it's basically there's an incentive mechanism for us to unblock other people and it's totally decentralized. It's not, I don't have to go and ask for approval. Which means it had like the, the pro capitalism is the system that makes sure that all of these spaces get filled by default. And as one space gets, gets filled, there's space for the next, the next space opens up after, right? Like after I have built a home gym, I like, yes, I've filled that space. Now I need heavier weights, right? Like, and it's, it's this stuff just keeps going and keeps going and keeps building on each other. And it starts with small things and then it ladders up to bigger and bigger things. And so that's the, that's how, again, just from this simple rule, person trying, blocked, space open, person incentivized to fill that space. That's how humanity's progress works. That's how progress has happened. It's the cause of it. Yeah.

It start, it starts out with, uh, somebody deciding that they were gonna improve the transportation of grain to the market. And then next week we're launching a rocket to go back to the moon and maybe to Mars eventually. So, um, you know, it's like that.

We, we created the Japanese toilet, like, you know, come on.

But let's talk about push versus pull capitalism, which is one of these, you know, criticisms that you, you draw out. Could you give the context on what you mean by push versus pull capitalism, Rob?

Yeah. So, it like, it, it really matters how you think this micro-level thing works, right? This micro-level thing we've been talking about. I believe that people buy products when they are trying to do something but blocked by their existing options, which creates a space for a product that they will pull. That's not how, like you mentioned it earlier, like you hadn't really thought about kind of like that level. Of this, and most people haven't thought about that level of this. In fact, if, if you don't think about it at that level, then you might default have this valence that, well, why do people buy things? Because they're convinced to buy them whether or not they need them. Sometimes they're good things, sometimes they're bad things, but, but right, like how, why people buy things is they are convinced by somebody to buy things that they may or may not need. Right? That is the push model versus the pull model in general. Now, if you think that the way all of this works is through the push model, then you basically think, okay, cool. It's a bunch of people convincing a bunch of people that they should buy things. That isn't inherently good. That is actually probably amoral at best and perhaps parasitic at worst, and is something to be like guarded against, to be, to, to, that is not an inherently good thing. When you see it as pull, it's like by default it is unblocking people and it's mechanisms for unblocking people that, that are just, just kind of like work on mostly autopilot. Then it's like, oh, this is a default good thing. And so just, you just how that works at a micro level. Are people, are people, do people buy things to unblock themselves from what they're trying to do? Or do they buy things because they're convinced to buy them? That simple, like difference in rule will determine how you think about capitalism, whether it's a good thing or a bad thing.

Yeah. And the, the more that you spend trying to build things that people want, I think that resonates even more deeply or interacting with people that aren't subject to that same, same pressure. Maybe one question here, Rob, like the— it feels to me like there's a couple different criticisms of capitalism that are existing. I think you're, you know, approaching one which is like there's like a snake oil version of somebody trying to convince you and sell you something and that you're just like overwhelmed or like humans are overwhelmed by these arguments and they end up purchasing, but they are poor and worse off as a result of it. I think that's the one that you're addressing there. How much of it do you think is like, is that versus, there's a bunch of externalities that happen, like whether through quirks in human psychology, like our inability to turn off our desire to eat carbohydrates, for example. And so like rampant obesity in the United States or, you know, pharmaceuticals that end up like, you know, pushing opioids in US markets or destruction of environmental, you know, ecological spaces or some of the things that exist within a framework of American capitalism, but aren't necessarily— I don't know that they're fully explained by that push versus pull approach. I'd love your thoughts on that.

Yeah, I think that the externalities case is a very real case, right? And it's like, okay, cool. How do we reckon with the fact that in order to unblock people, we might burn down forests, right? Or, or whatever, whatever the thing is, right? Or we might, you know, like we might harm animals, which I, you know, I don't, that, that's a thing that, that we struggle with. These are, these are good questions to talk about, but we have to say though that, right, like we have to say that the core mechanism is good, is by default good. And that's what, that's where I'm staking my claim is that the core mechanism is good over time, which changes how you approach questions like externalities, changes how you approach questions like regulation, because I assume that over time people, right? Like in, in some ways this is blocking people in some ways, bad things that companies do are blocking their customers are blocking and, and so, which means they're not serving their customers well, which opens space for new companies to come in. And so like you see in a lot of cases where, where companies have seemed dominant in spaces and they kind of mistreat their customers and all, someone else comes in and crushes them. And I think, right, like there's a question of to what extent does that happen in externalities? How do we make sure that the, those externalities are internalized. These are all like fine. These are good questions to have, good debates to have, but I'm staking my claim on the, the core process here being a good process.

Yeah. And having been close to Venezuela and understanding like the environmental destruction that happens in a system that is not capitalist, that's socialist, like it's not a, that's not a uniquely capitalist problem that exists there either. You mentioned, Rob, social responsibility and social— let's see, I'm going to read a paragraph. I'd love to have this conversation with you because I think there's a specific context and a specific approach to entrepreneurship that you're discussing, and I'd love to understand it more. You write, if you believe that in order to be a good person, your business needs to be focused on some social purpose or mission, You're going to fail because you're actively not focusing on unblocking customers. I meet so many social entrepreneurs who win pitch competitions but never win customers. We're wasting so much talent and energy. I'm going to— I'm going to put on pause my defensiveness on, on this one and just try to understand, like, what's the— like, what, what is the, the, the context, the ideas that are coming to mind as you, as you write about this?

Yeah. So this is, so this is downstream of the argument of, right? Like if you believe that capitalism is push capitalism where we convince people to buy things they don't necessarily need, what you have to do in that case is you have to append morality to capitalism. Right. And so that's where a lot of these concepts have come in. We've just, we, what, what's basically happened is we have seeded the ground of capitalism being a good thing by saying, okay, cool, well, we have to append social responsibility. We have to append social to entrepreneurship. We have to append these things that are like, yeah, I'm— that are basically saying, yeah, I'm working in a dirty industry, but I'm trying to do it morally. And so that's my objection here. That's what this is. The thing that we learned, or I'm pointing at you, but you can deny learning this, but this is, these are all of the things that we learned had the substrate argument of capitalism is bad or not good. And so we have to append morality on top of it, or we have to add this thing onto it to make it good.

Versus, let me, let me frame, excuse me. Take a stab at framing two different ways of approaching it. One is I'm in a dirty industry, but I'm not like everybody else. Like I do it a better way. And as a result, Well, I don't know, actually, I don't know how that continues. As a result, I deserve to win or something like, or it's better for society if my product wins or something. Another approach is there's a better way of doing business that has a different morality, like embedded in the business model and consumers will or will respond to that. And there's actually a, there is, there is a blocked demand, which is for a better way of operating. Um, is that, is there a difference there that, that we're teasing or is it, is it just that, you know, so there's, there's, but yeah, help, help me understand.

Like, makes sense of that. Yeah. So, so my, my argument is that unblocking customers is a social mission. You don't need an extra one. On top of it. And in fact, when you try to add an extra one on top of it, you stop focusing on just unblocking customers, which means you don't succeed, right? Because your business can only succeed if you unblock customers.

Yeah. Yeah. Yeah. Let me, let me sit with that for a second. The, I mean, the way internalizing it with my business, it would be like the process of unblocking customers in my case means giving higher quality content to children and families. Like that's, and the unblocking piece embedded in it has the like social benefit element to it. Is that the way to think about this, Rob?

Yeah, yeah, yeah. By virtue of, like, by virtue of selling to brands, you are helping unblock them to reach people who like need to hear about them. You're helping unblock them because they, they're blocked from accomplishing something that by unblocking them, you are just doing a like Good. You are serving them. And when you focus on unblocking them, you build a better product for them. You build something better over time and you continue to serve their needs, continue to help them make a ton of progress.

Yeah. The way I would probably articulate it in my case is like having created like a pure product for families has created valuable spaces for brands to then participate. And so the, like, the most of the social mission, well, I guess there's two elements of it. One is having created something that is pure for families, and the second side is, um, the selection of brands that don't cause conflict in between the presence of the brand and the, uh, the media that's being served to kids and parents.

Yeah. So like, is the second thing here, so we, we talked about like What this does to kind of like the social entrepreneur, the person who thinks that, oh, just serving customers, that's not enough. Just unblocking, that's, that's not enough. That can't be the mission. That's, that's, you know, too down in the weeds and, you know, that's not, we have to, we have to save the whales. We have to do like whatever the thing is, um, there, what that just makes those people, it makes something that's already hard 100 times harder. So it can work. Obviously anything can in theory work that's within the laws of physics, but it makes it way, way harder for them. But what it also does is it's, we've seeded the ground of, right, this capitalism as a good, as an inherently good and moral thing. We're just saying, yeah, it's not good. So we have to add social missions onto it, which the problem with that is that it basically takes a bunch of people and gives them the excuse to say, don't hate the player, hate the game while they do stuff that is not good. And so it, we, it's a self-fulfilling prophecy when you say, when you say, yeah, capitalism isn't good, we have to append goodness onto it. Well, then the people who are trying to append goodness onto it, don't succeed or like very rarely succeed. And then everybody else doesn't realize it's actually a good thing. And so they do the, like, they, they don't approach it that way. They approach it as if it is push capitalism and they, one, they, they like don't build good things. And two, they don't have good enough competition because everybody just has the wrong model in there. And so this is why my, my, like the thing that just you know, riles me up is, you know, the kind of, we'll just, the sweater-wearing person who's a very moral person in their private life and very kind person who then goes and rolls up youth sports leagues with the only thing they're gonna do about it to be triple the prices because it's right, like, well, capitalism, right? Like, There's an opportunity here. Let me attack that opportunity and da da da, right? Like, which is, it's basically giving that person the ability to not like to look at themselves in the mirror and say, don't hate the player, hate the game. It's a rigged game. We've all got to make like, like that's what this is doing.

What's the, what's the alternative there? We know a bunch of those like sweater wearing, folks that you're talking about, what would you rather, or like what is the system that you would rather see exist that either that opportunity doesn't exist or they don't pursue it? Or like what's the version of reality that you think is a, you know, could exist if people viewed capitalism as a positive, as a, you know, a force for a creative, a positive creation?

Yeah. Again, I, I don't know, but my default would, would not be, well, I, I think they, that kind of person should be ostracized and feel bad for themselves for about what they're doing versus like, you know, feeling fine. I'm just playing a dirty game or I'm in a dirty system, but I'm a good person, right? Like, uh, I think that person should just feel bad and think differently about things, but I generally like the approach of, okay, cool. They are creating blocked demand. When other people see that, they should go and attack that business and go build something awesome that unblocks those customers. And I like that as the mechanism because it requires no one from the outside or like no kind of like higher power that we have to, you know, it doesn't, it doesn't require kind of like laws or whatever to get involved. It's just like the dynamics of the system solve itself if people understand the system dynamics.

Yeah, that's interesting. It'll give me like something to chew on. I, some of the statements that you've made, I would temper personally, like based on my view of capitalism and how it works. Like I would, like you're, you've come in really strong with the capitalism as a moral force for good. And what I would say is like capitalism needs to be embedded in a moral understanding of society, and then it becomes something that is, that is positive. But like, the— I don't, I don't see like capitalism solving for, um, like the addictiveness of online poker and like the, you know, like that. There's some things that, that don't— I don't see how, um, there's like a better, more moral business model, but that capitalism operating in a moral understanding of how people, like you talk about shame and things like this, like I think that's good. Like it has to be connected to the way that a society and a people want to, want to operate and want their, or their communities to be structured and organized.

I actually 100% agree on that. And then the other thing here is like capitalism only works, you know, if we're not always at war and like being invaded and stuff. So like there, there were, there's some kind of like underlying things if there's a rule of law, right? Like there are these kind of underlying things that are enabling that enable capitalism, but those things without that system do not cause progress.

Yeah.

And the, that system without those things don't, doesn't work. And so they're kind of tied together, but it's the, like, what I wanted to spell out is what is the causal mechanism for new things coming into, into being that cause humanity to progress.

And, you know, I think I'm falling into the same trap that happens in like, you know, talking head CNN world, which is failing to appreciate that capitalism is doing 94% of the work. And like that causal mechanism that you're talking about is that force. Taking that for granted and focusing on like the other 6% that's like, yeah, but like this thing is broken. And it's like, yeah, we can find those broken things. But first appreciate the huge factory that actually is working powerfully behind the scenes. And if you dismantle it, the whole, the whole thing falls apart.

And that's a really, really good point that just made another thought click in my head, which is if you want to solve the externalities and all these other problems, you have to first understand how the system works. Hmm. What, what, how the system, because it's like, okay, cool. I tried to assemble a computer and it kind of didn't, like, I, I tried to assemble a computer from parts, followed the instructions, it didn't work. And it's like, okay, cool. What do I do now? I don't know. Let me just take a baseball bat to it and break the, like, it's like, it's like, no, I actually have to understand how a computer works at this point in order to know how to intervene to make it work better or to, or, or whatever. And so it's, it's, if we don't understand how this works, we're essentially just gonna take a, a baseball bat to, to the thing. 'Cause we don't know, we don't know what is load-bearing or not.

Hmm. Yeah. Fascinating. Well, the, you know, my, my biggest critique on this one is that we didn't drop it 10 days before Thanksgiving to arm everybody for conversations with Uncle Fred and Aunt Marge.

But yeah, Rob, this, this podcast will make you insufferable with your friends on this, this newsletter. Just, Forward it to your family and delete your email.

Rob, other things that we want to hit real quick?

No, I don't think there's a thing that's fun. We'll be back to, you know, more normal stuff. Yeah. But it's, it's just cool. Like, I, I don't know if, if you don't like this stuff, I'm sorry, but as we develop the models here, we kind of have to look at them from a bunch of different angles and say, do they work? What are the implications? Like what, where, where are the edge cases on them? And so,, this was a cool thought exercise.

That's been a, you know, an interesting thing about your approach. Having been close to you, I don't know if we've talked about this, but exactly what you just said, you know, having come from a math background, it was like you would test the extremities to understand how like a system worked or how a formula worked. And in this case, what you're doing is you're taking a model and saying like it we think it works at an individual startup level or at a, at a small business level or growing business level. Does it break if we expand it dramatically? And which is a good stress test for, you know, is this, is this actually the way that the world operates at a micro level? To understand at a micro level is to test that at a macro level. And does, you know, is the thing that's happening actually a summation of all these micro things or is there actually something else that's going on? And so, you know, folks, if you, if there's holes to poke in this, leave it in the comments, like, you know, poke, poke that hole. Like, what, where does this break in important ways? And is there some, is there a refinement to Rob's theory that, you know, he needs to be conscious of as he continues to develop this?

Yeah. What I'm trying to do too is I'm trying to make it simpler over time. I'm trying to make it, because I found like, I found there's a lot of different frameworks and stuff out there that you know, kind of touch on different pieces, but I think this actually needs to be ridiculously simple. I, I, I don't know why I feel that way, but it just feels like that's the like direction that it needs to go in. I don't think it needs a lot of moving parts. I think the more moving parts the system has, the harder it is to, to, to make work and to whatever. So what you can see here is like we talked a couple of weeks ago about Blocked or Coping. I actually have now grouped both of those into Blocked. Because it's just right. It's, I'm blocked from accomplishing whatever it is I want to accomplish. Maybe I'm using something, maybe I'm not currently about it, but I'm what I'm trying to do here. And as I'm building this 100-slide mega presentation thing about the book, I'm just trying to make it simpler, more essential. And, and, and so yeah, well, we'll keep going on that.

Awesome. Perfect. Well, we will catch you next week, Rob.