Vehicle thinking - How to win in the creator economy
The most important, yet least understood, opportunity in the creator economy
Down with the platforms! Power back to the creators!
Chants of the rise of the creator economy have grown increasingly more strident over the last couple of years. And there are undeniable shifts that are underway which will drive greater power back to creators.
However, a lot of anti-platform, pro-creator activists/thinkers focus on one single issue - extraction of huge rents by large platforms for organizing the market. The opportunity in the creator economy, then, is framed as a redistribution of power back to the creator in the form of smaller rents and greater agency.
This narrative misses possibly the greatest opportunity for the creator economy - the opportunity to leverage, what I call, ‘vehicle thinking’ and benefit from compounding returns.
This article is about ‘vehicle thinking’, why it’s important for creators, and why creators repeatedly sell themselves short when they don’t understand this mental model.
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Vehicle thinking is a mental model for creating scale and leverage in the creator economy, with the assets and agency of others.
I borrow the term vehicle from 'investment vehicles', which create a mechanism to accumulate third party assets towards investment. Funds, as investment vehicles, allow fund managers to benefit from an asset base contributed by others, and share in the returns of compounding on that asset base. These principles can be extended rather powerfully beyond 'money' and fund management to think about scale and leverage at a much broader scale for the creator economy.
Using ‘vehicle thinking’, all types of creators can benefit from the powers of compounding, leveraging some of the principles that fund managers use.
But to really situate the concept of vehicle thinking, let’s start with a quick primer on the creator economy.
What is the creator economy?
The creator economy refers to the sum total of economic activity originated by independent creative businesses and individuals running side hustles, who leverage their skills to create IP of some form, grow a following, and monetize the activity that ensues.
The promise of the creator economy isn’t entirely new. Books like Wikinomics, Cognitive Surplus, and the Long Tail spoke of the rise of the creator economy before it was cool to talk about it, back in the early-to-mid 2000s.
What followed over the course of the next decade was the rise of platforms, something I’ve written about extensively in my books Platform Revolution and Platform Scale. The creators certainly showed up but instead of building their own little empires, they were resident on multi-sided platforms that organized attention and economic markets between creators and consumers.
So what’s changing now?
Four things have changed towards the late 2010s.
Second, token economics now allows us to build decentralised infrastructure where economic value can be shared across a larger ecosystem of value creators rather than centralized and hoarded by a bunch of venture-backed college dropouts.
Third, improvements in hosted infrastructure towards the latter half of the 2010s now allow many new types of Saas tools to be created and operated at scale. Zoom is one example. Meanwhile the rise of API-based coordination allows these tools to interoperate in a manner that wasn’t possible merely a decade back.
Finally, as creators built social media following through the rise of the platform economy, it has increasingly become more economically viable for tool providers to gain scale by offering tools to creators. The same tools existed back in the early 2010s but tool creators gained scale by targeting businesses rather than individual creators. Back then, businesses provided scale, creators did not. Consider how Mailchimp and Aweber made almost all their money on B2B while using individual accounts to drive viral adoption. In contrast, ConvertKit, and eventually Substack, almost exclusively monetize with individual creators who now can leverage large platforms to gain a following and port them to these tools. This would not have been possible 10 years back when audience building was still scarce.
A common theme across these four shifts is a shift away from extraction by platforms and a shift towards empowerment of creators by tools that enable them to participate in the trade of attention and eventually money.
However, this overt emphasis on shifting extraction power away from platforms misses out on the biggest opportunity for creators in the creator economy: the opportunity to compound through Vehicle thinking.
Learn more about the big shifts defining today’s economy in the State of the Platform Revolution 2021 report. Get your copy of the report.
Vehicle thinking vs Funnel thinking
There are two broad ways to create momentum and scale towards your goals in the creator economy, by leveraging the assets and agency of others:
Funnel thinking and vehicle thinking
Funnels attract third party inputs for the sole purpose of converting them to output.
Vehicles attract third party inputs but create a larger goal and organizational architecture that all these inputs can be collaboratively leveraged towards.
Funnel thinking and vehicle thinking look deceptively similar in tactics but are fundamentally different in architecture.
Let’s take a few quick examples:
Run a charity dinner vs start a foundation
Running a charity dinner is funnel thinking. You aggregate donations and you're done. Starting a foundation creates the organizational architecture for larger compounding.
Organise events vs start a subscription community
Events are funnels that convert external intent and $ into ticket sales. A subscription community is a vehicle that can compound by organising the same intent and $.
Funnels are transactional. Funnel thinking funnels in demand and converts them to transactional goals.
Vehicle thinking creates a mechanism to organise the demand (and effectively the assets and agency of others) towards common goals and in doing so benefits from compounding, much like an investment vehicle aggregates third party funds and participates in the upsides of compounding.
From financial markets to attention markets
Traditionally, vehicle thinking was largely implemented either in financial markets or in internal organisations. Funds were vehicles to aggregate money in financial markets. Organizations were vehicles to organise agency of labor and resources as wells as third party capital towards compounding.
Today, vehicle thinking can be extended beyond financial markets to attention markets.
More importantly, and this is where the creator economy comes in, individuals can engage in vehicle thinking now. Organizational tools, which were largely available to large organizations to manage the agency of internal labor are democratised, allowing individuals to create the organizational architecture needed to pool third party agency and assets. Individuals can now benefit from the same leverage that organization traditionally benefited from.
Three components of vehicle thinking
A vehicle needs three components:
- A thesis to attract third party assets
- A common goal to stimulate third party agency
- An organisational architecture comprising core tools and governance to organise the assets and agency of these third parties
The creator economy is booming. But creators will miss out if they only apply funnel thinking.
The creator economy delivers outsized returns if you leverage vehicle thinking. Funnel thinking looks to harvest, vehicle thinking looks to organize and nurture
Funnel thinking looks to optimize lead acquisition and conversion cost, transactionally at the cost of a good experience.
Vehicle thinking focuses on growing value through compounding instead.
Vehicles exist in many forms.
Investment funds act as vehicles to accumulate third party assets. (Thesis-driven)
Venture funds like a16z go beyond that to act as a vehicle for third party expertise and agency as well. (Thesis + Goal + Architecture)
Not-for-profits act as vehicles to accumulate third party funding and agency. (Thesis + Goal, while the better ones also have Architecture)
Traditional clubs act as vehicles to accumulate third party assets and agency. (primarily Thesis-driven)
Online communities similarly act as vehicles to accumulate third party assets and agency. (Goal-driven, while the better ones also have Architecture, and a few layer on a Thesis as well)
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Two different creator economy stacks
The creator economy tool suite is ever expanding. A lot of tool suites today focus on helping creators get better at funnel thinking. The tools that will win in the days ahead will be the ones that help creators leverage vehicle thinking.
These tools will commoditize specific types of organizational architecture and provide that to creators as-a-service. The more complex the organisational architecture, the greater the moat for such tools.
In fact, the reason we saw the gig economy take off over the past decade was the ability to commoditize gig economy workflows. I’ve written extensively about this in my research with the ILO.
Creator economy workflows are more difficult to commoditize. This is a good thing.
This essentially means we will have more horizontal players - like Stripe - that commoditize one component across diverse workflows, than vertical players - like Uber and Deliveroo - that commoditize the end-to-end workflow and leverage that control to extract huge rents.
Moving the creator economy beyond the post-platform zero-sum narrative
Today, much of the advocacy for the creator economy focuses on
The extractionary power of platforms,
The empowerment of creators with a new stack of tools, and
The minimal extraction of decentralisation, enabled through protocols.
All of these narratives are limiting.
By focusing overtly on the extractionary power of platforms or on the minimal extraction of platforms, we promote a zero sum narrative. A protocol extracting 2% of a transaction vs 30% extracted by a platform is shifting 28% back to the creator.
The empowerment of creators also follows a limiting narrative. A tool suite which charges a fixed subscription fee vs an ongoing tax on creators helps the best creators gain more as they scale. While this creates immediate benefits for creators, it doesn’t really reimagine the pie for the creator. It still focuses on the same pie and changes the tax structure on the pie.
Both these narratives stem from funnel thinking. Eventually, funnel thinking is zero sum thinking. Your position in the funnel takes a % off someone downstream. By reducing a platform’s take rate, we pass the benefits to the creator. By removing the transaction tax and following a subscription model instead, we merely change the tax structure on the same pie.
Vehicle thinking, instead, works to define a new pie. It does not simply redistribute the pie. Funnel thinking thinks only in flows. Vehicle thinking looks to accumulate stocks - of third party assets and agency.
Platforms are successful not because they take a hefty cut from transactions but because they optimise the cut towards creating network effects and the compounding that ensues. Platforms create vehicles to leverage third party inputs. Unless creators do that, they will miss out on the true opportunity of the creator economy.
What does this mean for you?
Whatever you're doing, you could look to switch from funnel thinking to vehicle thinking.
First, think of how you could create a larger vehicle around your work as a creator. What are the incentives for third parties to participate?
Second, think of the organizational mechanism you will employ to organise your vehicle.
Third, look at the tools and governance you need to put together to set up your vehicle.
And that brings me to the real opportunity in the creator economy.
The real power of vehicle thinking in the creator economy is when you end up building the platform-of-one - a vehicle that scales up to an extent where it ends up being a platform in its own right, even though it’s cored around the personal brand of the creator.
Again, this isn’t new. Jon Oringer started Shutterstock back in the early 2000s by heading out and clicking a bunch of photos (a few tens of thousands actually). In India, Byju’s was essentially created around the personal brand of Byju Raveendran as a ‘star’ instructor. Salman Khan did this with the Khan Academy and now Scott Galloway is doing something similar with Section4.
But what’s changed is that the growing tool suite for the creative economy now provides these opportunities to a much larger range of creators.
Strong personal brand + Creator economy tool suite + Vehicle thinking
= The platform-of-one.
It’s a fascinating time to be alive!