Honest incentives

Listening to a recent episode of Sharp Tech, there was a really strong point made by Ben Thompson in regards to Substack that I feel really hits the mark for businesses in general. Although he is a supporter of Substack and is routing for them to succeed, he makes the case that they are not up front and honest with their writers about what their true incentives are. The issue is that they are a VC-backed company that has very aggressive growth expectations while at the same time claiming to be 100% writer focused.

Ben's take is that these two positions cannot exist without coming into conflict, and indeed you see this with their opposition to ads, their inability to bundle writer content together and their most recent decision to launch Notes which may be a great move for Substack long-term, but potentially could cost their writers vital distribution.

To close on Ben's take, he points out that open-source tools like Wordpress are the only platforms that can be 100% writer focused since their incentives are fully aligned. There's nothing wrong with Substack pursuing their best interest as a business and sharing some of that value with writers, but they should be more transparent about the deal is.

Zooming out a bit from this specific take on Substack, I think this issue of honest incentives applies to lots of other businesses in general. Startups claiming that they are a family is one obvious example. Clearly businesses are not families, because when the rubber hits the road and you are pushed by an investor to lay off 20% of your workforce, you have to do it. While it goes without saying that family members are not something that can be downsized.

Large corporations that feel like they need to wade into every political and social justice culture war are another example. The most honest approach would be to stay in your lane, say you can't be everything to everyone, and focus on the value you create for customers. That is where the financial incentive is and trying to be something beyond that is either bad strategy or dishonest.

This is something to keep in mind not only while building a business, but also as you are evaluating potential products, platforms and partnerships. If you want to know the direction a business is going, try to figure out what their actual incentives are.