Comment by mbesto
1 day ago
> "a provider is trying to capture for themselves all the value their product creates for you".
And what precisely is the problem? Obviously, we have incomplete information, but in efficient markets ALL providers all trying to capture the full value of the solution they provide. With infinite time, markets essentially adjust themselves towards this goal. As long as that number is 99.99% (meaning the buyer creates an additional 0.01% of economical value) it's still valuable for BOTH parties.
FWIW most SaaS businesses severely underprice their offering relative to the economic value they create.
There's a theory an economics that says that the more different prices a provider can charge the more of the surplus they capture (ie they can tilt that percentage towards the seller and away from the buyer).
Of course, if they're a monopoly provider and the buyer really needs it, they have to cough up. But generally there are substitute products. So the buyer would do well to look for an alternative that doesn't do differential pricing to capture more surplus for themselves.
> And what precisely is the problem? Obviously, we have incomplete information, but in efficient markets ALL providers all trying to capture the full value of the solution they provide.
Because:
1) In efficient markets, all users also try to capture full value they get from the they bought. Efficient competition is purely adversarial.
2) You say, "As long as that number is 99.99% (...) it's still valuable for BOTH parties". Unfortunately, incomplete information and information asymmetry makes it more than likely that the "is trying to align their pricing" so that this number is more than 100%. That is, if you're not careful, they'll scam you.
The two above are arguments why this is a problem for the buyer, in practice. The next one is more general:
3) Everything that's good and nice and human happens inside economic inefficiencies. For human beings, a truly efficient market is a literal definition of hell - everyone's suffering as much as possible, spending all their energy to earn exactly enough to barely survive.
> FWIW most SaaS businesses severely underprice their offering relative to the economic value they create.
As it should be.
I'll say here what I say to people who talk about stopping to post anything publicly, lest it ends up in LLM training data:
Trying to capture for yourself 100% of the economic value you're producing is an extreme form of greed. When companies try to do that, they get called evil and used as examples of everything that's wrong with late-stage capitalism and such. Human society works best when people don't capture all their productive output, when they actually do leave some money on the table, because this allows others to take it and use it to innovate and create more value - which, again, if they don't capture entirety of it, allows even more people to build on top of it.
All of us who produce, we also consume. Society and its markets form an ecosystem, which needs some inefficiency to evolve, be resilient and thrive.
(See also: running any system at 100% capacity is "efficient" up until some random event causes the load to grow ever so slightly, even for a tiny moment, at which point the system suffers a cascade of failures and dies.)
> All of us who produce, we also consume. Society and its markets form an ecosystem, which needs some inefficiency to evolve, be resilient and thrive.
And all of us engineers get paid REALLY WELL because people sell software for us. Software is cheap relative to its value. Stop complaining that you're getting ripped off.
> Human society works best when people don't capture all their productive output, when they actually do leave some money on the table, because this allows others to take it and use it to innovate and create more value - which, again, if they don't capture entirety of it, allows even more people to build on top of it.
You have no evidence to support this.
> And all of us engineers get paid REALLY WELL because people sell software for us. Software is cheap relative to its value.
That's not at all clear, an it's its own can of worms.
A lot of software, even widely-used software, may as well have negative real value, because its perceived value is just an accounting trick. Any time you see software allowing someone to do something that required a specialist before, particularly in company setting, it's more than likely that the value is negative. Think e.g. everyone doing their own expenses. A company used to have a bunch of moderately paid jobs dedicated to doing that. Naturally, people doing those jobs quickly got very efficient at it. In comes software, those jobs get eliminated, and now you're having everyone - including all the absurdly highly paid engineers (software or otherwise) - having to semi-regularly (not regularly enough to get efficient at it) drop what they're doing and spend half a day or more on doing expenses. Productivity goes down across the board for obvious reasons. But, what the business sees, is a) legible savings on eliminated finance jobs, and b) mysterious "costs disease" that seems to be affecting the company (and market at large), keeping productivity below expectations.
Mysterious my ass.
Then, a lot of software is directly or indirectly serving adtech. This is where most of the high salaries in tech come from. Software is cheap and programmers are paid well because it's all funded by scamming everyday people and ruining their lives. That's a nearly inexhaustible money source. The actual value of all that software provides people, integrated over the entire society? Deeply in the negative.
Then, there's plenty of SaaS businesses that would be more ergonomic and efficient if replaced by an Excel spreadsheet. Those deliver negative value to customers almost by definition.
Etc.
Sure, there's some software that's delivering way more value than it costs. But there's much less of such software than people think.