‎The donuts arrived for a price, and a world of possibility opened up.

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‎The used to be, if a person wanted something, they had to make it or find it themselves. Today, there is a market for almost everything. This is a fundamental law of modern capitalism: markets emerge for almost everything and become more liquid and legible over time.

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‎This trend, accelerated by technology, is creating unprecedented opportunities for founders and consumers alike. For startup founders, understanding this force is vital for identifying new ventures and navigating the trade-offs between scalable opportunity and authentic value. This article explores the mechanics of this phenomenon and how you can build a lasting company within it.

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‎The Mechanics of a Modern Market: Liquidity and Legibility

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‎· Liquidity means you can easily convert something into something else, typically a universal medium of exchange like money. 

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‎In a liquid market, there's always someone willing to make a trade. Think of a food delivery app: the moment you decide you want donuts, there is someone willing to bring them to your door for a fee. The transaction happens smoothly and instantly.

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‎· Legibility means that the value of something becomes clear and quantifiable. It's no longer an abstract concept but a visible price. For instance, a creator on a social media platform might have always derived indirect value from their audience through networking or brand building. With a direct revenue-sharing program, the value of a view becomes legible, a concrete amount paid per view, making the previously intangible, tangible.

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‎This combination is incredibly powerful. It allows for efficient allocation of resources and lets individuals and businesses make clear-eyed trade-offs. When a market is both liquid and legible, the cost of a transaction, whether it's buying donuts or paying for cloud compute is clear, and the exchange is guaranteed.

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‎A Toy Example: From Donuts to Digital Content

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‎The principle applies from the mundane to the digital. Consider a simple real-world example: ordering a dozen donuts. The options are to go without, spend the time and effort to get them, or pay a premium for the convenience of delivery. The emergence of a liquid market for delivery makes the third option possible, and the itemized fees make the value of your saved time legible.

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‎This same dynamic is transforming digital realms. A writer who spent years building an audience on a social platform derived immense, but indirect, value from it. Then, the platform introduced a creator payout system. Suddenly, the writer received a substantial check simply for doing what they had always done. The value of their work, in terms of views, became liquid (direct payment) and legible (a specific dollar amount per view). A market for influence and attention, which was always there, became formalized.

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‎The Founder's Dilemma: The Allure of the Mid-Level Game

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‎However, this new world of liquid, legible markets comes with a critical trade-off, especially for founders and creators. As markets mature, it becomes easier than ever to be "mid".

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‎The very clarity of market signals can be a siren song. When you can see exactly what kind of content generates views or what business model attracts quick investment, the temptation is to optimize for those short-term, legible signals. There are now playbooks for "medium-level" success, formulas for building a following and producing content that predictably generates revenue.

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‎The danger is that in polishing away your unique, weird, and specific curiosities to serve an algorithm, you risk losing what made you stand out in the first place. You might achieve moderate success but get stuck on a mid-level plateau, having sacrificed the long-term, less legible value of authentic connection and unique innovation for short-term gains.

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‎Building for Lasting Value in a World of Markets

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‎So, how does a savvy founder navigate this landscape? 

‎The key is to have a clear strategy for when to engage with these liquid markets and when to resist their pull.

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‎1. Use Liquid Markets for Non-Core Activities: For tasks and services that are not central to your mission, lean heavily into liquidity and legibility. Use AWS for compute instead of building your own server infrastructure. Use a delivery service to save time on errands. These services are mature, efficient, and allow you to focus your resources on what truly matters for your startup.

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‎2. Protect Your Core from Short-Term Signals: Know what you want to stand out for. Identify the unique insight, technology, or perspective that only you can offer and that cannot yet be easily captured by a simple market signal. This is your source of alpha. While others contort themselves for short-term algorithmic payouts, there is immense, durable value in "continuing to just be yourself and talk about whatever lights your fire, algorithm be damned".

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‎3. Understand the Shift in Value: As Packy McCormick notes in his essay, "As markets become more liquid and legible, beta improves while alpha erodes". The average outcome in these markets gets better, but outperforming the average becomes harder. The most valuable things, the ones that create legendary companies, will always be the ones that are the hardest to price at first, the ones that create new markets rather than just playing in existing ones.

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‎The Market is a Tool

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‎The proliferation of markets for everything is, on balance, a sign of progress. It creates efficiency, unlocks value, and provides opportunities that never existed before. The right move nine times out of ten is to gratefully take advantage of this liquidity and legibility.

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‎However, the most successful founders will be those who recognize the tenth time. They will use liquid markets as powerful tools for their non-core operations while fiercely protecting their unique, core value from the temptation to optimize for short-term, legible gains. They understand that in a world where it's easy to be good, the greatest rewards are reserved for those who dare to be different. The most valuable things, after all, will always be the ones that are the hardest to price. Your startup should be one of them.