How to assess the "inevitability" and "contingency" of a business model using first principles?

Good question. Understanding this will make you much more accurate when evaluating many projects. Let's skip the jargon and talk plainly.

To judge something using first principles, imagine yourself as a child who loves to argue and constantly asks 'why,' or like you're playing a game of 'peeling an onion.' You strip away the fancy packaging and trendy concepts (like Web3.0, Metaverse, private domain traffic) layer by layer, until you're left with the hardest, most core essence.

What is this 'core'? It's human nature and physical/economic laws.

How to Judge 'Inevitability'?

A business model has 'inevitability' if, even if company A fails at it, companies B and C will inevitably emerge to continue pursuing it until it succeeds. This is because it aligns with fundamental laws and is an 'unstoppable force.'

You can 'peel the onion' from these three perspectives:

1. Does it satisfy the fundamental human desires for 'laziness,' 'greed,' 'craving,' 'fear of death,' 'beauty,' or 'connection'?"

• Example: Food Delivery. Strip away the apps, subsidies, and riders, and what's its core? It's 'laziness.' People simply don't want to cook or go downstairs, yet they 'crave' good food. This need hasn't changed for thousands of years. Wealthy households in ancient times also had chefs and servants running errands for groceries – same principle. Therefore, the concept of 'food automatically delivered to your door' has inevitability. Whoever can satisfy this need most efficiently and affordably will win.

• Example: Search Engine. Strip away the algorithms, ads, and bidding ranks, and what's its core? It's humanity's pursuit of 'certainty' and 'efficiency.' My mind forgets, I don't know, I'm unsure – I want to know the answer immediately. This need is also eternal. Therefore, 'providing quick and accurate information retrieval' has inevitability.

2. Does it bring an order-of-magnitude improvement in 'cost' or 'efficiency'?"

• Example: E-commerce vs. Physical Stores. What's the core of e-commerce? It drastically reduces 'transaction costs.' You no longer need to spend time going to a physical store (efficiency improvement), and retailers save on expensive downtown rents (cost reduction). This advantage isn't a 10% improvement; it's a 10x or 100x improvement. Such disruptive efficiency gains represent an inevitability.

• Example: Streaming vs. DVD/Movie Theaters. What's the core? Extremely low marginal cost. Producing a DVD incurs material and shipping costs, and a movie theater seat can only be sold once. But with streaming? Once a movie is made, the additional server cost for one person to watch it versus 100 million people is negligible. This overwhelming economic advantage dictates its inevitability.

3. Is it on the 'inevitable path' of a major technological wave?"

• Example: Mobile Payment. Once smartphones and 4G networks became widespread, everyone had an always-online calculator with GPS and scanning capabilities. At that point, 'using this device to pay' became an inevitable development. It's more convenient than a wallet and more secure than a credit card (due to encryption). Therefore, the emergence and popularization of mobile payment is a natural outcome of technology reaching that stage.

To summarize, when you peel back an 'inevitable' business model to its core, you'll find it either firmly grasps an unchanging aspect of human nature, achieves an overwhelming advantage in economic principles, or is the natural outcome of a technological wave. It flows as naturally as water downhill.

How to Judge 'Contingency'?

A 'contingent' business model means its success heavily relies on a specific time, specific environment, specific people, or a certain amount of 'luck.' Once these conditions change, the model might collapse.

Again, using the 'peeling the onion' approach:

1. Is its success built upon 'information asymmetry' or 'policy dividends'?"

• Example: Early Daigou (personal shoppers/cross-border purchasing agents). What was its core? It exploited price differences and information asymmetry between domestic and international goods. You knew what was cheaper abroad, while people domestically didn't. But this 'gap' is temporary; with the rise of cross-border e-commerce and official brand entry, information becomes increasingly transparent, and the foundation of this model disappears. This is contingency.

• Example: Businesses reliant on subsidies. Some new energy projects and sharing economy ventures initially relied entirely on government subsidies. Once subsidies are withdrawn, if they lack self-sustaining capabilities, they quickly collapse. Their lifeblood comes from policy, not the market – this is contingency.

2. Is its popularity driven by 'emotion' or 'trends,' rather than genuine 'need'?"

• Example: Certain viral products, like the 'Dirty Dirty Bread' of its time. Did people buy it because it tasted significantly better than other breads? Not necessarily. It was more about curiosity, following a trend, and the 'emotional value' of social sharing. Once the trend passed, demand plummeted. It satisfied a temporary 'novelty' rather than a long-term 'necessity.'

3. Is its barrier 'people,' rather than 'systems'?"

• Example: Companies highly dependent on the charisma of a founder/influencer. If the vast majority of a company's business comes from the founder's own fame and influence, with fans buying because they like them, then this model is very fragile. If the founder's public image collapses, they fall ill, or retire, the company might be finished. Its success is tied to a 'person,' not a replicable, scalable 'system' – this is contingency.

A Simple Self-Test Method:

When analyzing a business model, you can ask yourself these 'devil's advocate' questions:

1. 'What if... were gone?'

   • If the cool app interface disappeared, would people still use this service?
   • If the founder left, would this company still function?
   • If subsidies were removed, would users continue to use it?
   • If competitors imitated it, what advantage would I still have?

2. 'Would it still hold true 10 years ago or 10 years from now?'

   • For inevitable models, the core need existed in the past (though fulfilled differently) and will very likely exist in the future. Contingent models might be completely invalid at a different point in time.

3. 'What 'must-solve' problem does it address?'

   • Does it solve a 'die without it' problem, or a 'nice to have' problem? The former often leads to inevitability, while the latter might just be contingency.

Ultimately, first principles allow you to ignore superficial excitement and noise, and get straight to the essence of things. The 'inevitability' of a business model lies hidden in those most fundamental and unchanging laws.