Value Creation vs. Value Capture

Value creation can be defined as activity that creates something that is valued, usually by others if the context is economics. Value capture in contrast is the monetization of that value. There are plenty of examples of situations where value is not captured at all by those who create it - or anyone in particular. For example, the contributions of a stay-at-home parent to society have no way of being monetized under a free market economy.

The most common solution to the problem of obviously valuable activities not capturing value is coordination by a central authority. Governments of various levels are collect taxes at the proverbial gunpoint and distribute the money to those who engage in value creation that has difficulty capturing value under the free market economy. This is done to a great extent in welfare states. In Finland, for example, families get €100 per month per child. This is a so-called horizontal income transfer from the childless to those who have children. Daycare is heavily subsidized, too. Private or public daycare facilities charge a means-tested maximum of less than €300 per child per month while the true cost per child at a typical public daycare center is about €1000 per child per month. Even if you and your spouse made as much as €10,000 in gross monthly income put together, you wouldn't have to pay more than something like €280 per month per child. Another typical case is the use of public money is the prevention of contagious diseases by offering testing and treatment free of charge.

The only two methods of value capture available for creators of valuable content online have so far been the subscription model whereby the content is behind a paywall, advertising or donations. Steem implements a fourth option, which is harnessing the greed of speculators to pay for content creators. This is why Steem was able to survive without being a tipping platform, having paywalls or having any advertisements at all on any of its front ends or having too much paid promotion by bid bots. (In fact, before HF 21 and the liberal downvoting all bid botted content in Trending by the community, any advertiser could make money by advertising in it, which is a totally insane concept.) What Steem did was totally genius. Speculation is fueled by greed (and limited by fear). The operative principle was the Greater Fool theory. A speculator buys an asset and wishes to sell it to another speculator who in turn is hoping to find an even greater fool to sell it to. At the end, a bag holder is found who pays all the bills.

Steem does have a value proposition that relies on advertising for the most part and generosity (tipping) to a small degree. Unlike cryptocurrencies that have no use case other than functioning as a payment system, Steem has a clear and well understood method of value capture - advertising - that has partly been implemented after the collapse of the price in November 2018. That's when the purely speculative phase came to an end. Before that, there were a lot of Steemians who were completely clueless as to the fact that something having value is a completely different matter altogether than that capturing value. There were many people who were dead set against advertisements on Steem.

The phase we're in now is hopefully one where those who are left are the strong hands (except for Steemit, Inc that has to sell to pay for development) who have a long-term view of Steem and also ideological reasons to hold. That's because the income from advertising is still not enough to pay for all the costs.

Anyway, I have to say I love the irony of harnessing the greed of speculators and maximizers to pay for posts that document purely altruistic acts like collecting trash from your local park or helping old ladies cross the street. I don't think there has ever been an arrangement like this in world history. In fact, projects that use Steem Power to reward reliably documented altruistic acts could be another reason to buy STEEM worth marketing to those interested. On Steem, a donator who uses SP they have paid for to reward people who advance their favourite cause is capable of forming personal bonds with the people totally unlike when donating to traditional charity organizations. That's something to think about.