Correcting the Mind: Netflix and the Conservation of Attractive Profits

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Glasp

Jul 20, 20233 min read

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Correcting the Mind: Netflix and the Conservation of Attractive Profits

In today's fast-paced world, finding a sense of peace and clarity can be challenging. But according to Lao Tzu, the key to a fulfilled life lies in correcting our minds. He believes that when we align our thoughts and emotions, the rest of our life falls into place. This concept can be applied not only to personal growth but also to business strategies, as shown by the success of companies like Netflix.

Netflix, once a humble content delivery provider, has transformed into something much more significant. By embracing the commoditization of time, Netflix has become a marketplace where content creators and consumers can connect efficiently. This shift in focus has allowed them to disrupt the traditional television industry and establish themselves as a dominant player.

The idea of commoditization may seem counterintuitive, but it's actually a powerful tool for innovation. When a particular aspect of a value chain becomes commoditized, there is an opportunity for new value to emerge in an adjacent stage. This concept, known as the law of conservation of attractive profits, explains why Netflix's pivot to a content marketplace was a strategic move.

To fully understand the law of conservation of attractive profits, let's take a closer look at the example of the microprocessor industry. Historically, microprocessors were not good enough, so their architecture was proprietary and optimized. This meant that the rest of the computer's architecture had to be modular to accommodate the microprocessor's needs. However, when the basis of competition shifted to low-power systems, the architecture had to change. The modular ARM architecture allowed for the integration of devices like the BlackBerry and later, the iPhone.

The same principle applies to companies like Airbnb and Uber. Airbnb commoditized trust, separating it from physical properties. This allowed them to integrate trust into a global network of hosts and guests. Uber, on the other hand, commoditized dispatch and modularized cars. By breaking up formerly integrated systems, these companies have not only disrupted their respective industries but also created new value for themselves.

Returning to Netflix, we can see that they have modularized both the production and delivery of their service. This approach has allowed them to move closer to the customer and create a more integrated customer experience. By commoditizing time and distribution, Netflix has been able to integrate production and customer management seamlessly.

So, what can we learn from Netflix's success and the concept of correcting the mind? Here are three actionable pieces of advice:

  • 1. Embrace Change: Netflix's transformation from a content delivery provider to a marketplace shows the importance of adapting to changing market dynamics. Embrace new technologies and business models to stay ahead of the competition.
  • 2. Find Your Unique Value: Rather than trying to appeal to the masses, focus on creating "must-see" shows and events that cater to a specific audience. Cultivate a loyal fan base that will base their subscription decisions on access to your unique content.
  • 3. Modularize and Integrate: Look for opportunities to modularize certain aspects of your value chain while integrating others. This allows for greater flexibility and efficiency, ultimately leading to the creation of new value.

In conclusion, by correcting our minds and aligning our thoughts and emotions, we can find clarity and fulfillment in both our personal and professional lives. Netflix's journey from a content delivery provider to a marketplace demonstrates the power of embracing change and the law of conservation of attractive profits. By commoditizing time and distribution, Netflix has been able to integrate production and customer management, creating a truly integrated customer experience. So, let us learn from Netflix's success and apply these principles to our own endeavors, unlocking new possibilities and opportunities along the way.

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