With my earlier piece, I talked about how I spent my time writing, accompanied by bubble tea and Jeezy. I realized, at the end of writing it, that I was trying to figure out how much value I was creating and extracting. Writing really is thinking.
Warning: This piece is about writing and money. If your eyes are sensitive to words like “value,” “extraction,” and “Stratechery”—especially “Stratechery”—you should press fast forward. This is business thinking for people who might consider themselves writers, authors, and content creators. I’m not covering anything craft related, and I think writing is much more than just a vehicle for making money… Okay, let’s get it!
The Creation and Extraction of Value
The definition of value, with this blog post, is this one we’ll lift from Merriam Webster’s 1913 dictionary:
The property or aggregate properties of a thing by which it is rendered useful or desirable, or the degree of such property or sum of properties; worth; excellence; utility; importance.
For example, businesses create value, capture dollars in exchange for value, and then pay some of those dollars to employees. I wouldn’t say that value is clear cut yet—but investor Chamath Palihapitiya makes an estimate:
“Companies generally only give employees 5–10% of the value that they create. As much value as I created at Facebook, I captured maybe 5% of that value for me, economically. That’s just the scenario. That’s how companies can get built to be profitable.”
Let’s keep in mind this seems like an estimate, and different businesses have different types of unit economics and ratios in this case; for example, a services company might constantly review its billing and compare it to the hours people work.
For example, if a dev studio charges its clients $15,000 for a pair of two full-time developers, and those devs each get paid $100,000 per year, then the devs would be making $3,846—$1,923 per week each—and the company would make $11,154. Most of that goes back to sales, growth, operating costs, etc… and maybe the owners get to eat what’s left over. In this case, two employees together extract around 26% of the value they create for the company—13% each—so they’re not doing too badly for themselves from a percentage standpoint.
Hourly rates aren’t so difficult to measure. The hard part is with writing, we’re actually working with very amorphous raw material called ideas—research, stories, experiences etc.—which requires different techniques than simply showing up and working for an hour.
The Lifetime Value of an Idea
In The Death of the Artist, fiction author Ben Sobieck says (p. 171), “Content may have lost its price, but not its value.” Ain’t that the truth…
Let’s put our business hats on for a second and understand what that means. Businesspeople have found a calculation to measure what they call lifetime value (LTV), which estimates how much money they’ll make in a customer’s lifetime on average. The concept of it is the most important part here, the math itself is really boring (and isn’t that applicable to the piece, despite the similarity in name).
There’s this idea that ideas aren’t worth much value; execution is. I think, to a large extent, this is true. Writing and researching is a form of execution; you have packaged or repackaged an idea and are showing it to someone else.
Every single piece of writing is made up of an idea. I like to think that one of the most atomized forms of these ideas is a note. Here are five examples of forms that ideas can appear in, for non-fiction writers:
- Summarized stories
- Tactics (or “lifehacks”)
- Mental models
How much money will researching, writing, and publishing each idea make, on average? That might involve some combination of advertising revenue, payments at Medium (which allows you to republish), as well as more comprehensive re-packaging—which means bundling the idea as books, paid newsletters, courses, and such…
So for example, when a publication pays USD $200 for an article, it’s easy to think of that as the lifetime value. And in some cases, that’s what they’re offering—USD $200 for content that hopefully makes that cost back in advertising or through retaining a paid subscriber. Maybe in that article, you’ve researched and written about 3 really different ideas, with 10 points (e.g., statistics, quotes, etc.).
That’s just the finances though. When we talk about the lifetime value of an idea, we can’t limit our perspective there. We need to look at actual value—what ideas you’re authoring, what subject matter you’re covering, how someone else might find your post useful. Are you making someone laugh? Or are you showing someone a practical way to double their income? Is your idea and research original, or has it already been said or conducted by someone else? Are you just compiling other people’s research? Have you found the people that this post is most useful for? If you’ve spent 10 hours doing research, can you split the posts up or re-purpose the information in a different way? (If Gary Vaynerchuk can, why can’t you?)
Any information advising you on writing better or promoting your work should, hopefully, help you figure out how to improve the inherent lifetime value of each idea.
With creative work, it may not feel like the lifetime value of your ideas are improving, but try not to measure it too often. It’s like standing on a slip of paper—one piece of paper barely makes you feel like you’re off the ground, but 365 pieces will get an extra inch off the ground. It’s noticeable.
Value Capture, In Action
If you’ve gotten paid with regular salaries or paycheques, you already know about using time as value capture—hours in, dollars out. If you’re a writer, you might also be used to getting paid by the piece.
But if you want to make more money writing posts, you’re actually playing a different game. There are other factors that affect the lifetime value of each post type—exploration, craft, promotion, etc—and the bundling or packaging—the value of a book, etc.—and in business, the writer’s goal is to extract more value from each piece of writing. Of course, the indirect monetary value also matters—serendipity, learning, etc.—kind of like an innovation lab approach to writing.
Perhaps intrigue has been the only reason you’re still reading all this gibberish, so I want to highlight three examples of authors who have figured out parts of value capture:
Exhibit A: Ben Thompson’s Stratechery makes $3 million per year. He runs it himself, and it’s perhaps the best example of a business doing a good job capturing the value it creates. In addition to daily commentary and news, Thompson uses his writing to create and document ideas, frameworks, and models for viewing the ever-changing world of technology, and charges a higher price than subscribing to the New York Times. With each post, he provides a better high level overview of the world of technology, and a worldview of the lens through the context of technology. From a financial perspective, the content is “more valuable” to its readers than the New York Times would be to its readers. Thompson can squeeze more value because he actually also worked on the package that his writing goes into—the Stratechery website is self-hosted at WordPress and processes payments on Memberful, which is essentially the only intermediary. Thompson uses the ideas in his free writing to attract more readers to the ideas in his paid writing.
Exhibit B: Sarah Cooper’s another great example of capturing the value she creates. She wrote at Medium before it had a partner program. One of her pieces, 10 Tricks to Appear Smart During Meetings, went viral and got millions of views. She captured the value by using it to get a three-book deal. So while the post didn’t pay off directly, it paid off very generously indirectly, and that’s how Cooper captured the value. That has since morphed—she recently grew her following by orders of magnitude with her Trump lip syncs on TikTok, capturing the lifetime value of these ideas not only with the TikTok engagement program but with a Netflix deal, a separate TV show deal, and tons of publicity.
Exhibit C: Wesley Yang wrote his essay, “Paper Tigers” for New York. It’s probably 10,000 more words than anyone would have written, and long-form writing isn’t necessarily designed to go viral, but the essay was incredibly well done. I’m guessing he monetized the traditional way at first, which is getting paid by New York for that piece. But he has since traded up, obtaining the rights to compile his already pre-existing essays and bundle it as an essay collection, The Souls of Yellow Folk. He didn’t even need to re-write it; simply copying the ideas, and typesetting them and putting them into a new package, improved the lifetime value of his ideas.
I don’t have deal-sizes there, but the math would be different for all three people. I’m working on a framework for a piece for Marker right now. That particular idea is costing me a lot of time, but I think it’ll be worth it.
The Lifetime Value Perspective
If we go back to one of the opening quotes, content has mostly lost its price because media businesses were rocked by the Internet and were scrambling to find new methods to make money for it. There are other factors, of course, and others have covered it better…
As a writer, part of your job is mainly to keep an eye on the lifetime value of your ideas. Don’t just let your own perspective and your perceived popularity inform you. Ask peers and friends to read your pieces and gauge their honest opinions (“or a friend’s piece,” if you’re thinking they want to protect your feelings). Survey your readers, ask your editors, and such, and let the evidence inform you.
There are also operational ways to do this. One practical way to do this is to keep organized—with notes, Airtable, etc.—so you can easily access your knowledge. Maybe you have enough ideas between two posts to combine into a third post. (Don’t waste the leftovers!)
Then, the other part is to get the finances up. See Medium like you see Twitter, a discovery platform, not something to directly get paid off. Instead, extract value for your posts indirectly—bundling it differently, connecting with and pitching people who can get new distribution for it (speaking agents, book agents, etc.).
Your posts should be differentiated enough from other people’s posts, that’s another way to extract more value. Like Neil Pasricha writes, different is better than better.
Meta-Reflections on Lifetime Value
I’ll close with a guess on the lifetime value of this particular idea. Other people have used their own words to describe this concept, I’m sure, but we’ll see if this can break out of obscurity.
I think it’s pretty original, and the inklings of greatness are there for the concept—but like most other writers, I’m not a great judge of my own work. I also haven’t refined this piece the way I would for someone else, so perhaps I’ll find a new, better, way of explaining this idea another day. And I’m okay with that. This post is part of my quantity-based strategy, which allows for quality to emerge organically and somewhat inexplicably, for now. What you’re seeing is a draft, not in the sense of writing, but also as a snapshot of me processing this idea. I’m releasing it to the wilderness of the internet not because it’s the best version of what it is, but because I think that’ll make the lifetime value of the idea better.
Sure, I can think about it more, but other people might see it and think of better ways to phrase or frame it—possibly linking back to me (promoting this piece)—or not. But either way, the lifetime value of it is higher out there than sitting in obscurity on my local drive or Google Drive. Ultimately, that’s probably the best innovation of the Internet. Distributing the idea improves its lifetime value. So if it’s important enough, say it more than once—re-use the idea.
One final thing—if an idea is important enough to you, you need to hold it close to you and make the world see its lifetime value. Another idea for another day.
The Best Place to Find Ideas
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