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The Performance Economy

The Performance Economy is the direct result of adopting the principles of pull. In the performance economy, we generate, use, and make decisions with real-time data. In the performance economy, the economics of a firm is tied to the economics of its customers. This is in stark contrast to the way we do things today, where companies often see customers as adversaries. They withhold payment as long as possible, they charge fees for services that may or may not benefit their customers, and they try to take as much as they can from customers, even if it’s not right for the customer.

In the performance economy, companies are partners. Companies only make money if they help their customers. Will this work for your doctor? Your stock broker? Your insurance salesman? It will take time, but eventually the concepts outlined here will lead to a natural alignment between company and customer.

Transitional

Hedge funds, venture capital funds,  private-equity funds, and limited partnerships have been operating this way for a long time. Typically, a fund manager makes 20% of the profit of the investment. This is called a carry or a performance fee. However, fund managers also typically charge a 2% management fee, and when the fund gets big enough, the management fee tends to overshadow the performance fee. There is a natural tendency for funds to grow beyond the ability of the manager to perform as well as he/she could in the early days as the manager is more involved in fundraising than in making money for clients. A few funds stay small enough to preserve the alignment between principal and investor – these are the early examples of the performance economy. There are others in the book, Pull.

Fully Semantic

Here are some of the companies and groups helping build this future:

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