Alex Danco - Scarcity, Abundance and Bubbles

Principles & Lessons:

• Emergent scarcity is now driven by demand-side friction, not supply-side constraints. Alex argues that technology—especially the internet and cloud computing—has largely removed traditional supply-side scarcity by making infrastructure (e.g., compute, distribution, capital) abundant and cheap. What remains scarce is user attention, trust, and intent: “If business people are trying to tap into some new source of scarcity… maybe now, it is going to be driven by the demand side.” Hence, the locus of defensibility has shifted from owning infrastructure to owning access to consumers' decision-making.
• Bubbles can be coordination mechanisms that unlock investment in hard-to-fund, long-term projects. Danco’s distinction between “bubbles of belief in a different future” (e.g., railroads, dotcom, crypto) and “bubbles of belief in the same future” (e.g., credit bubbles) is critical. The former can be useful because they solve the coordination problem of multi-round financing: “You can’t get the first investor unless the second is guaranteed… but that’s only possible in a bubble.” This view reframes speculative excess not as an error, but as a necessary social function for funding paradigm-shifting infrastructure.
• Differentiation in startups is often mimetic rather than fundamental. While Silicon Valley celebrates “differentiated founders,” Alex points out that most startups are extremely similar operationally: “We all raise money the same way, hire from the same pool, use the same tech stack, and are judged on the same growth metrics.” This structural homogeneity produces a Red Queen’s race of competition—“I love you for copying me because it validates me, and I hate you for copying me because it makes us competitors”—but paradoxically fuels innovation. Danco's insight is that cultural sameness, not differentiation, is what enables startup productivity at scale.
• The most powerful companies own the ‘function layer’ by mediating between abundant assets and specific customer intent. As the world moves from ownership to access, dominant firms operate not by producing goods, but by orchestrating functions that match users with those goods (e.g., Uber, Amazon, Spotify). Alex explains: “I’m not hiring an object anymore… I’m hiring a function to deliver the outcome I want, and that function calls upon whatever object is available.” Owning the network that governs this matching—especially pricing, like Uber's surge—is the new choke point.
• Venture capital, despite its rhetoric, is structurally built on undifferentiation and mimetic competition. In a surprising inversion, Danco observes that startups thrive not because they are unique, but because they are similar. This similarity—same hiring, funding, stack, growth targets—creates collective validation, lowers friction for entry, and fuels obsessive competition. But undifferentiated systems require periodic resets: “Failure rituals in Silicon Valley are the equivalent of cultural scapegoating—they release pressure and restore the appearance of differentiation without resolving structural sameness.”
• Autonomous delivery will transform suburban economic geography by reversing the logic of density. Danco argues that autonomous vehicles—especially as logistics infrastructure—will return a competitive advantage to the suburbs. “It’s going to be easier to move stuff to people than people to stuff… driverless trucks are the new railroads.” This reorients scarcity away from inner-city land and toward distribution intelligence. The suburbs, far from being a “soulless wasteland,” may become the locus of entrepreneurial activity, especially for immigrant and first-generation business builders.
• Technology repeatedly inverts scarcity, but new scarcity always emerges around coordination, curation, or trust. Whether it’s the printing press, recorded music, or cloud computing, new technology takes something scarce (like distribution) and makes it abundant. But this does not eliminate scarcity—it shifts it to another layer. “After distribution became free with Napster, scarcity re-emerged around curation… which is why we got Spotify.” In investing terms: the locus of pricing power moves upward each time a layer becomes commoditized.
• Biology is poised to be the next transformative platform because it combines infinite replication with real-world agency. Unlike software, which runs on inert machines, biology is self-replicating and environmentally interactive. Danco lists four industrial-scale applications: “biology can make things, break things down, sense things, and transform energy.” For instance, engineering a plant to change color when it detects lead in water is a biological function with immense public utility. What excites Danco is not just medical biotech, but generalized biological computation and manufacturing—life as a substrate for scalable function execution.

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