Wednesday, December 13, 2006

Craigslist and Communism

Isn't it great how Craigslist keeps getting weird looks from established capitalist institutions? Always makes me laugh.

The idea of a company which doesn't exist to maximize profits, or even make profits, is intriguing because at heart we all want to make our services and just enough to live off of. We learn in finance classes and business that it's essential to maximize shareholder value and issue the largest dividends possible and blah blah, but that's hardly inspirational.

Nobody gets inspired to start a company with 'Someday, i'll issue large dividends to tons of people I don't know.' The point of a business is, first and foremost, to provide a service. Of course, sometimes the service is maximized profits, but our deliberate, well-structured financial system has skewed investing away from the original point.

Business is a test. It's a test of how well your idea scales to the general populace, a test of your ability to capitalize on opportunities, a test of how well you can build a team to build and improve products, and yes, a test of your ability to maximize investment. But before all of these things, Business is a test of whether you want to test your idea.

Craigslist represents the "new" for-profit charity model at its finest; the company exists to fulfill a niche, build a product, and test an idea first and foremost, and revenue only exists to maintain its hardware and equipment. I use the irony (read: quotation) marks because this philosophy is a return to the basics of business, not something new at all.

Non-profit charity is the fundamental process that drives every entrepreneur to invest time and effort into a risky idea. Entrepreneurs succeed when they have a drive to build something useful that they want, and to scale it so that other people can use it too. It's not about maximizing revenue, or it would never get off the ground.

The new environment is great for encouraging entrepreneurship of this sort because frankly, the internet's nothing special anymore. Ut's a big deal, but it's not a magical land where anything's possible. It's a tool, an environment, a part of the real world. There are so many fledgling services and companies out there right now that you can't jump in with both feet hoping to maximize revenue. Even if you can find the motivation to start the company based on that, there are dozens of companies stealing your market share and customers' attention.

From the view of established companies like those looking askance at Craigslist, this makes a bubble because there are too many companies trying to take advantage of too small of a space. But really, it's just the long tail again. Everybody's going out and making their own for-profit charities, offering their services and hoping that if other people like it they'll come and visit. And because of AdWords and other similar services coming out (some of which are really cool), this is actually a viable model without relying on non-profit status and handouts.

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