The fusion engine

How stuff gets better

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Warning: This is a theory post, along the lines of The Divine Lever and Push, Pull, and PULL - back to practical stuff next week.

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We are all trying to do things in our lives. This “trying to do things” is what I call demand.

As we try to do things, we sometimes find that we are blocked. We don’t have the right methods or means or tools. Maybe existing tools are too expensive, maybe they’re not quite right. This is “blocked demand”, what I call PULL.

When there’s PULL, there’s a space where a new thing could come into existence and unblock us. If it fits our PULL and unblocks us, we would be weird not to buy it.

We keep trying to do more things. We never stop striving, because striving is human. As we accomplish small things, we strive for bigger things. We get blocked as we strive, and new spaces emerge. It is a never-ending cycle.

This is the history of the modern age. It is how we have pulled ourselves out of poverty, fed the world, created the Japanese toilet. It is how future generations will know abundance we can’t even fathom today: Unlimited healthcare. New forms of transportation. Shrek 5. Luxuries that aren’t even imaginable to today’s billionaires will be available to the average person tomorrow.

All of this happens because we have a magical fusion engine for progress, so that every space gets filled by default, and humanity gets less and less blocked every day. This fusion engine is capitalism. Its fuel source is demand, the only unlimited energy source in the universe.

This year is the 250th anniversary of Adam Smith’s Wealth of Nations. These days, it is unfashionable to defend capitalism, which is why it is REALLY important for someone to defend it. Developing the PULL framework has given me a new way to understand and appreciate capitalism.

Capitalism = Incentive to Unblock

For all of human history, probably, we have tried to do things, gotten blocked, and opened a space for something new to come into existence.

But just because there is an available space for something new, that doesn’t mean something new will appear. Somebody has to notice the space and have a reason to do something about it. This doesn’t just happen. It takes a lot of work (and often a bit of capital) to build new things. Capitalism provides the incentive to do that work and invest that capital.

The incentive is simple: If we do the work to unblock people, we earn profit and can grow, and by doing this we can unblock ourselves from what we want in our lives. And if I am selling something shoddy, you can sell something that unblocks my customers. When you do this, I am forced to improve what I’m selling - making everyone better off and pushing the world forward.

Capitalism, therefore, is positive-sum: I make myself better off by making other people better off. By acting in my own interest, the pie gets bigger. If I don’t act in a way that makes the pie bigger, I create a blockage and another business comes and crushes me. The net result is that progress happens by default. No altruism or reeducation camps required.

No other economic system has this incentive structure. In any other economic system, you and I are just unwashed peasants with no reason to make new things that make each other better off. Progress, then, only happens if it tickles the fancies of feudal lords or bureaucrats or eccentric inventors. Of course, inventions and innovations have happened under other economic systems - but they are rare. Progress doesn’t happen by default.

Blocked demand + incentive structure = never-ending progress.

“Push” vs. “Pull” Capitalism

When you understand PULL, you understand what causes new products and services to emerge. You understand why people buy things, and you see capitalism as a good thing, a system that incentivizes humans to unblock humanity. Capitalism causes progress - and while there are edge cases and bad actors, these things are mostly solved within capitalism - with more competition, for example.

But that’s not how most people see capitalism. They see “push” capitalism, which assumes that the reason people buy things is that they are convinced to buy them, whether or not they need them. As a result, they see the winners as predatory and don’t see the causal relationship between capitalism and progress. Capitalism is not an obviously good thing in their minds; it needs either corrective or replacement.

This idea is everywhere I look. I’ve had a bunch of recent experiences with normal people who believe capitalism is anywhere from “not good” to “outright bad.” These people aren’t activist professors of Marxist history at Berkeley, or worse, Harvard Kennedy School students. They’re your average working adults with your average adult jobs.

Worse: “Push” capitalism is in the water of business schools, which should be defending capitalism.

At Harvard Business School, called the West Point of Capitalism, we were taught that capitalism is not a good thing, that it is “push” capitalism and needs some external corrective. This wasn’t said overtly, but in a thousand different little ways, this is the message we received.

One example relevant to entrepreneurs is the idea that we need to be “Social Entrepreneurs” - or, more broadly, that we should have some broader mission or purpose than merely unblocking customers.

At first glance, this doesn’t seem like such a big deal. Who could object to entrepreneurs who want to think beyond mere profit and loss? Who could object to making capitalism good by appending “social responsibility” to it?

But these ideas break our magical fusion engine in three non-obvious ways:

1. If you believe that capitalism isn’t good, and that in order to be a good person, your business needs to be focused on some social purpose or mission… you’re going to fail because you’re actively not focusing on unblocking customers. Unblocking customers is really hard when you’re focused on it. It’s impossible when you’re not. I meet so many social entrepreneurs who win pitch competitions but can’t win customers. We are wasting so much talent and preventing progress!

2. Then, if you accept the premise that capitalism is default-not-good, you have no defense when people say, “don’t hate the player, hate the game” as they, for example, roll up youth sports leagues and jack up prices. Thanks to “push” capitalism, you just assume this is the default outcome of capitalism and throw up your hands. When instead, you should be seeing a huge opportunity to unblock a lot of people - and absolutely demolishing the rent-seeking class by building something better.

3. Finally, if we don’t understand how and why the fusion engine works, we’re going to see genuine challenges (e.g., externalities like pollution, inequality, addiction, etc.) and “solve” them in counterproductive ways that (1) don’t actually solve anything, and (2) take a baseball bat to our magical fusion engine. For example, what should we do about those sweater-wearing Chads rolling up youth sports leagues? If we think capitalism is not good, the answer is probably to add laws and regulations. Repeat that a million times and what happens?

This is how capitalism stops working. It stops unblocking people. It becomes purely extractive. Progress slows. And eventually, we dismantle our fusion engine while singing “kumbaya” and sending our children to the dark ages. All because we misunderstand the mechanism.