The Value of Consumption

A company creates value by developing a product or service that provides enough value to users that they are willing to give up money (directly or indirectly) to the company in return for receiving that value. The medium of exchange used to quantify the value of that exchange is money and the result is revenue for the company. Assuming the costs of the company are less than the revenue then the company makes profit, which can be distributed to the shareholders or reinvested to grow the company. The former results in money now for shareholders and the latter results in future value.

All future value of the company is captured by the shareholders of the company, but it was the participation of the user (consumer) that caused the value creation. For most companies, new users (consumers) are the constrained resource of the organisation and as a result will pay a lot to find new users. Some of the most valuable companies in the world provide access to new consumers and are able to charge very high sums thanks to their scarcity power when it comes to the constrained resource. All of the value created by these companies flows to the shareholders of these companies rather than the user who creates the value.

The key point here is that since consumption is the constrained resource of nearly every company, there is huge value attributed to this consumption. When this consumption is aggregated, the result is scarcity power and this is why Google, Facebook and Amazon are so powerful and valuable, but the value distribution doesn’t seem to make it to those that cause the value creation. An easy way to look at the value created through consumption is by looking at the revenue multiple of any publicly traded online retailer, such as ASOS, Boohoo, Amazon, Ebay or Stamps. They will generally trade at 2 - 6 times revenue, which means when you spend £100 as a consumer, £200 - £600 of value flows to capitalists.

Tentop believes there is an opportunity to aggregate consumption to create value, but distribute that value amongst those that created it rather than the capitalists. Current instruments to distribute value to those in the value chain of commerce include shares, money and loyalty tokens and by taking a first principles approach using technologies available. We will flip capitalism in its current form on its head by distributing value in a fairer and more efficient way. We feel that by aggregating demand like this, suppliers on the network are accountable to the people rather than just the capitalists leading to a fairer and more sustainable system.

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