Don't take this as a disagreement with your whole comment (it isn't), but one trap that people fall into is equating what people say they want with what they actually want - at least as expressed by what they are willing to pay for, which is what shareholders and VCs care about.

There was an article on HN a day or two ago about how asking people to bet on political propositions affects their stated beliefs - when there's no cost, people will happily spout whatever their favoured party's line is, but if you ask them to put their money where their mouth is, they will often skew away.

VCs are investing based on where they think people will actually put their money, not on where they say they will. If evidence is that people spend a lot of time social networks, AND evidence is that advertisers will pay money for web adverts to people, then it might follow that a new social network is a good investment.

The main issue as I see it is that as we use money as a proxy for value, we disproportionately weight the desires of the rich over those of the poor. A service for rich people (e.g. an online photo sharing website) doesn't need to produce much utility to be worth a lot of money, whereas a service for poor people (e.g. clean water for poor villages) can produce a lot of utility and still be worth little money.

If VCs were funding companies which made solid profits from customers and were therefore able to pay the VCs a multiple out of that profit I'd find this argument that money talks more convincing. As it is it seems that value for internet companies is not based on revenue or even potential revenue.

This disconnect between the money invested and the money earned completely breaks the connection you talk of - customers willing to put their money where their mouth is. Someone in the chain is paying lots of money, but it certainly isn't the actual end users or customers of most startups - often they run at a loss for a substantial period, and then they have no way to turn their free readers/users into paying ones in sufficient numbers to support their valuation or the money put in. VCs really don't care about that though, as long as they are paid more than they put in - that can easily happen if the companies are bought by larger corporations like IBM or Yahoo in the mistaken belief that the customers can be converted - the question of revenue then becomes academic as the companies are folded into a larger parent and the actual value impossible to discern.

It's an interesting time to be alive and an interesting market to be working in, but I do find the distortions created by massively inflated valuations and companies built just to be sold on worrying. Forgive me though, I must stop wittering on HN and get back to work now :)

I would suggest that there is also a difference between what people actually want, and what people demonstrate with their behavior, what they actually do.

What people do is not neccesarily what they want either! For all sorts of reasons. Poor self-control, costs/risks (financial/social/psychological) to doing what you really want, etc.

Just becuase someone spends money on something doesn't actually mean that, in an ideal world, they want to be paying for it, or want it in their lives.

The sorts of examples I was thinking of though, would be:

* Someone who wants/says they want everyone to be paid a living wage and are willing to pay somewhat more for products made by people earning such -- but still consistently buy the cheapest products, made in sweatshops.

(That one might be, in part, about a lack of trustworthy information?).

* Someone who wants/says they'd rather there be fewer McDonalds around and more healthy restaurants, but still spends lot of money at mccdonalds, and maybe not at an available healthy restaurant.

(lack of willpower?)

I think you are right about the, er, epistemilogical problems, but I think there are still some examples that make it pretty obvious that what people actually want is not always represented by their actions.

Or at least not always by their _purchase actions_. Maybe the larger point is that, contrary to certain religions, the market is not in fact a perfect aggregator of people's true desires. What is successful in the market is NOT always representative of people's true desires, for all sorts of reasons (including the obvious one that some people have more market power than others, so are better represented in 'the market' -- but that's just the very beginning of reasons).

Given this, as a business, one has a choice of focusing only on what you can get people to do (eg. cigarettes, farmville, tabloid journalism, in fact any business that exploits the above reasons) as opposed to focusing on what they truly want - even though we want people to act in a certainway. The first kind are the businesses which are generally considered "evil".

Your idea of wants differentiated from actions seems to be quite fruitful. I used to tell people "don't ask your customers, instead, observe their actions". Clearly, something more is required to make a non-evil business. Thanks for teaching me something new. :)

That is the essence of free markets. If you look up the "welfare theorem's" you will see that the free market promises to do precisely what you describe: maximize the weighted sum of individual utilities, where the wealthier individuals generally have higher weights.

Ultimately, it is in human nature to care more about oneself and one's family (and possibly other people who you consider to be part of your in-group) than others. The free market just happens to make this fact very stark. Each time I buy a coffee for myself instead of donating to a poor village, I cannot avoid the conclusion that I care more about my momentary happiness than whether someone in that village gets some avoidable disease.

  > There was an article on HN a day or two ago about
  > how asking people to bet on political propositions
  > affects their stated beliefs ...

Such is the predatory nature of the capitalist.

Honestly, that rhetoric is phenomenal.

Another trap people fall into is equating what people are willing to pay for something, with the amount of value that's actually able to be captured in the market for that item.

The finance industry, say, is able to capture a lot of the value they create (some might say more than they create). Some other industries, less so.

The price of an already taken photograph, or that of a pre-packaged software or web service tends towards zero, however if you want original content, or to build software, hiring the talent to do it is going in the opposite direction (e.g. good wedding photographers charge a lot of money, as photos may be cheap and plenty, but good photographers aren't neither cheap or plenty).

> this is the kind of illusory value the writer posits for today's fêted startup web workers

The real value of a "web worker" is not in its ability to write PHP to serve HTML, but rather in their ability to find and solve problems. Good engineers that solve problems will always be in demand. Example: I would put an engineer to do marketing, because a good engineer would know how to do measurements, statistics and A/B testing.

Cuts to the heart of it indeed: "The pitcher cries for water to carry and a person for work that is real."

http://writersalmanac.publicradio.org/index.php?date=2006/09...

I just paid several thousand dollars to a wedding photographer for my wedding. That is pretty standard from what people tell me. I wouldn't say that no one is willing to pay for content. It depends on the content.

The real reason is not really that people don't want to pay for it, but rather it's available for free, so there's no need for most people to pay for those things. If there were no free travel guides etc., people would still pay for them.

A comparable situation is happening with newspapers. People will pay for news if they cannot get them for free. Since you can these days get news for free, a lot of people are getting rid of their newspaper subscriptions.

If that results in a gradual erosion of quality as less and less effort is put in to researching and writing articles, and more and more of the content is churnalism or opinion pieces, then it's a net loss for everyone - eventually the adverts will be more interesting than the real content which lives in the interstices of advertising - I think that would be a shame. I've seen that happening in major newspapers in the UK like the Independent or the Guardian. We've seen the same in television with the rise of Reality TV etc - cheap to produce, controversial, and the perfect filler to squeeze between advertising segments.

At least with regards to written content, most people have access to much more interesting content. Heck, hn is more interesting than my newspaper. And we manage to find stuff to talk about.

Investigative journalism is just a case of the tragedy of the commons, that now run out the huge luck it got n the past. And we as a society need to start looking at it as such, and not fantasize that it is a standard business.

but it's the sad fact of me outperforming my peers, in something that is essentially a big pile of junk and waste of time.

i'm now thinking about going to some neuroscience lab in the states to get a ph.d and build something meaningful again.

Basically, the majority of people cannot appreciate art. Abstract ideas and brilliant commentary are simply not valued by the majority as much as a working system, even if it's as obvious a concept as Facebook. When you hire someone to write something, it's almost impossible to predict the audience's reception to it. When you make a website, a logical machine, you at least know you have something less abstract. A website is more tangible than a piece of prose. Words indeed have no value in themselves.

You would expect the people who make the software that facilitates web publishing to be paid more on average, no? Developers get paid more because they make the stuff that people want -- stuff that does something or solves a problem. It's that simple.

http://en.wikipedia.org/wiki/Loss_aversion