The challenge of broken price signals

The importance of traction in evaluating projects

Successful venture capitalist Paul Graham writes:

You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible.

In for-profit startups, you can tell if you’re “making something customers actually want” by observing whether people purchase your product or service.

For political entrepreneurs, if only it were that easy!

In the political world, the price signal is broken for several reasons, including:

• Ability vs. Willingness to Pay. Customers can be unable to pay even for things that are value-additive, because so much of the political world is so underfunded, and funding is so imperfectly linked to performance.

• Structure. As noted in an earlier post, competitive campaigns have structural rationales against trying new things at all, let alone paying fair price for them.

As a result, major impact opportunities exist by offering free or under-priced services. None of my major projects (which are producing tens of thousands of votes at very attractive cost) could have succeeded if they charged anywhere near fair value of their services.

BUT

Offering free or underpriced services is an easy way to destroy value. Doing so makes it far more challenging for entrepreneurs and funders to know if a project is actually a good investment.

I struggle with this conundrum. The best answer I’ve found so far is to focus intensely on signs of traction. Traction can be earned revenue, but one can observe payments of other scarce resources as well.

When major campaigns send multiple senior staff to weekly Vote Tripling trainings, they pay with their time. When organizations adopt Empower (even for free), they show a judgment that it’s better than using spreadsheets. When volunteers around the country choose to run an Indivisible chapter, use Indivisible tools, and attend Indivisible trainings, they pay with their time and reputation.

None of these payments cover the bills, but they are valuable signals to the funders who do.