Monthly Archives: December 2015

The Cascade of Costs

I’ve been considering raising Gingko’s prices.

However, I realized that I can achieve the same effect by dropping Intercom and replacing it with something free or much cheaper. Intercom is an incredibly powerful tool, but I am just using it as a second inbox for support.

Why did I jump to “raise prices”?
I believe this is a perfect example of a “Cascade of Costs”.

Intercom has raised $66 million over 5 rounds of funding, and so it needs to do more than cover its costs, pay to continue developing the product, and have enough of a buffer to survive hard times. It is forced to grow rapidly, and forced to charge more, to make a profit for those investors.

Because Intercom is a tool for businesses, that means that every single business that uses it also needs to charge their customers a little (or a lot) more to cover their expenses and make their own profit. If those businesses serve other businesses, the cascade of higher costs/higher prices continues down to all their customers.

Don’t get me wrong: I love Intercom, and I believe they’re making the best choices out of the ones they have. It’s just that the pattern of “move to San Francisco, get funded, get big, raise prices” is so ingrained into the tech world that it’s not questioned half as often as it should be.

I just got back from a trip to San Francisco. It’s a nice city. But frankly, I was very underwhelmed. The single most striking thing I noticed is the absolutely out-of-control cost of rent and living.

Which means that every body on Earth pays more for software (with money or attention), because of the cost-of-living in Silicon Valley.

Also, fewer kinds of software are developed, because the focus needs to be on the few that can make a vast profit for a corporation, not the many that can make a decent living for individuals.

I don’t question the logic of this, only it’s seeming inevitability.

For myself, I might still raise Gingko’s prices. After all, it’s evolved a good deal since launch. But because I’m free of investor pressure, and mobile, I am not tied to just that option.

For instance, to better support ourselves, we might move somewhere cheaper. Right now I’m travelling Spain with my wife and son, to escape both the (relatively) high costs and (insanely) low temperatures of Montreal.

Got my work done in the pre-sunrise hours, so I could spend the day roaming Madrid with my family. By the way, everything I now own (except books) fits in that backpack I'm wearing.
Got my work done before sunrise, so I could spend the day roaming Madrid with my family. By the way, everything I now own (except books) fits in that backpack I’m wearing.

Who knows, we might fall in love with some white-washed small town on the Spanish coast, and make our base here instead!

Freedom and profit don’t have to be mutually exclusive.
But if they were, I’d choose freedom any damn day!