“What is the next thing?” The ineffability of that next thing preoccupies me more than anything else.

—Carmen Gimenez Smith, poet, editor, publisher, educator

The logic of creativity is “leap before you look.” You cannot fully see anything new from an old place. … It is the leap, not the look, that generates the crucial information; the leap through time and space, beyond the swarm of observable fact, that opens up the vistas of discovery.

—George Gilder, Wealth and Poverty, 1993

Friedrich A. Hayek, the 1974 Nobel Prize winner in economics, believed the human mind could not see its own advance; the future is unpredictable, and we simply cannot know now what still remains to be known. Knowledge is about the past while entrepreneurship is about the future. Knowledge is wealth, but all economic growth comes from learning, mostly entrepreneurial hypotheses and other innovations that get tested in the free market. This is why it is so important for businesses to run on ideas, not hierarchies. Knowing is just another way of saying, “I'm done thinking about it.” But the economy is never done experimenting, creating, and leaping out of the liminal space, casting off the old and discovering the future for the rest of us.

This is why the future cannot be taught; if it could, there would be nothing for intrepid venture capitalists and angel investors to discover. Francis Bacon articulated the importance of imagination over knowledge: “The knowledge which we now possess will not teach a man even what to wish.” Angel investors and venture capitalists place bets on contrarian thinkers who have a different vision of the future, and because the future is unknowable, the bets are worth placing even if only 1 out 5 (or 10) come to fruition. It is a reliable and relatively low‐cost method for society to progress while at the same time creating wealth by serving others.

I, for one, would not want to live in a world where the future is knowable and rational, a population comprised of automatons calculating with logical precision exactly what needs to be done to optimize current performance, whether in a business or society. Dreams always die when they come true. “Without measureless and perpetual uncertainty,” Winston Churchill said, “the drama of human life would be destroyed.”

BUILT TO LAST VERSUS DYNAMISM

I would rather live in a world where my life is surrounded by mystery than live in a world so small that my mind could comprehend it.

—Harry Emerson Fosdick, American pastor

Since the macroeconomic environment of nearly any developed country is comprised of millions of businesses, the aggregate marketplace is a laboratory where multiple hypotheses get tested, where customers spending their own money ultimately falsify the business model of any one particular firm. All business ideas and theories are, ultimately, subjected to this perpetual authentication process, that of the sovereign customer.

For all of our advances in management thinking and the thousands of business books published each year claiming the path to success with some new fad, there is simply no economic theory that can predict which particular company will succeed and which will fail. If there were, competition itself would serve no purpose—knowing who is going to win the Super Bowl makes it pointless to play. And like the incalculable future, competition is incredibly risky, and full of uncertainty.

Think of the institutions in any society: Churches, the family, labor unions, professional organizations, government, bureaucracy, businesses. With the exception of businesses, nearly all institutions in society are conserving institutions, with the mission of preventing change, slowing it down, or preserving the status quo. Only the business enterprise is a destabilizing institution, organized for creative destruction. This is why economic dynamism and growth depend on innovation and the entrepreneur, because as organizations age they tend to regress to stability and homeostasis, not change. This is why most innovations take existing industries by surprise, as the late Harvard Professor Clayton Christensen has documented so well in his work.

Without entrepreneurs, economies are barren. Without the risk takers in society, growth would slow immeasurably, and we would be much poorer as a result. Discovery and innovation always take us by surprise; otherwise, we could run the economy with bureaucrats and our immense computational power—an idea falsified by the former Soviet Union, and other centrally planned economies.

A world where companies are “built to last” only exists in book titles, not in a dynamic, innovative economy. I would not want to live in a world where companies last forever. This is the ideology of communism and socialism, not a vibrant and dynamic free market economy. If a business is no longer creating wealth for its customers, I want the market—meaning sovereign customers—to ruthlessly drive it out of business for wasting society's resources. I do not want to inhabit a world built from the economist's perfect competition model, where businesses do nothing but provide job security, while cranking out commodities on a “level playing field,” with no ability to effect prices, output, or customer preferences. How dreadfully boring. No innovation, no dynamism, no growth, no life.

I look forward to the destruction capitalism produces as much as I do the dynamism. Silicon Valley may be a font of creativity, but only because it rests atop a mass cemetery of bankrupted hypotheses—many more ventures fail than succeed—falsified by the sovereignty of the customer. The same applies to companies, which is why capitalism creates prosperity—it has a built‐in falsification process whereby companies, like scientific experiments, can be proven wrong and removed from wasting society's oxygen. It is not survival of the fittest; it is survival of only those firms that continue to add more value to society than they consume.

This is precisely why entrepreneurs are so essential to growth and wealth creation. Existing organizations that have done something well millions and millions of times are usually not the best vehicles to perform something new for the first time. Niccolo Machiavelli said it well in The Prince: “Innovation makes enemies of all those who prospered under the old regime, and only lukewarm support is forthcoming from those who would prosper under the new.” Let us turn now to what business model innovations we may see in the future.

GLIMPSING AHEAD

While subscriptions are all the rage at the moment, in our view they are a stepping stone toward other, more customer‐focused revenue models rather than the final point.

—Marco Bertini and Oded Koeningsberg, The Ends Game, 2020

The Ends Game is a thought‐provoking book, which we recommend you read to gain an understanding of experimentations that are already being piloted in the constantly evolving revenue and business models of companies. The authors' main argument is that companies are still selling the “means” to customers (products and services) and then promising that the desired “ends” will result. This is difficult to argue with, even in the subscription model. A lot of the ways it has been implemented are still far too dependent on discrete services, rather than continuous transformations.

The authors further argue that an exchange is inefficient if customers experience friction in any of these three touchpoints: access, consume, perform. Subscription has moved the needle in terms of access and consume, but not so much with perform. As professionals, we can't guarantee results. But why not? I know the ethical challenges with this: Professionals cannot guarantee results, outcomes, and so on. But put those aside for the moment. The following are some experiments that are already being done to move toward pricing the actual results, rather than just promises:

• Winterhalter, a German company, charges customers for clean dishes rather than selling dishwashers.
• Teatreneu, a comedy theater in Barcelona, Spain, installed facial recognition technology in front of every audience member that could detect when they laughed, charging them 30 euro cents per laugh (to a maximum charge of 24 euros).
• “In 2007, Johnson & Johnson proposed a pay‐by‐outcome model for an oncology treatment in the United Kingdom, under which the company would refund any money spent on patients whose tumors did not remiss” (Bertini and Koeningsberg 2020).
• In 2017, Amgen would rebate buyers of its drug Repatha—that reduces the risk of heart attack or stroke—if the patient suffered a heart attack or stroke.
• Imagine if universities were to focus on student transformations, not just inputs such as tuition, class credits, etc. UATX, a nonprofit that is building a university in Austin (aka the University of Austin) is considering just that. A revolutionary new concept that is surely going to disrupt the higher‐education market with its new business model, UATX is planning to welcome its first class of undergraduates and graduate students in 2024. It explains its new financial model: “We're completely rethinking how a university operates by developing a novel financial model. We will lower tuition by avoiding costly administrative excess and overreach. We will focus our resources intensively on academics, rather than amenities. We will align institutional incentives with student outcomes.” To align these incentives, one idea it is considering is the following: “UATX is working on a proposal to guarantee the median salary in a student's major field for five years following graduation. If a graduate makes less than the median salary over the five‐year period, UATX will pay the difference” (Nonpublic draft prospectus, UATX, personal communication, April 5, 2022).
• “Bugs” Burger Bug Killer Company (based in Miami, Florida, and run by Al Burger) is a pest control company specializing in the hospitality industry. Al knew most customers did not want to control pests, but to wipe them out, so he developed an extraordinary guarantee to ensure his customers he could do the job:
  • You don't owe one penny until all pests on your premises have been totally eradicated. If a guest spots a pest on your premises, BBBK will pay for the guest's meal or room, send a letter of apology, and pay for a future meal or stay.
  • If you are ever dissatisfied with BBBK's service, you will receive a full refund of the company's services plus fees for another exterminator of your choice for the next year.
  • If your facility is closed down due to the presence of roaches or rodents, BBBK will pay any fines, as well as any lost profits, plus $5,000.

Subscriptions demand that the firm focus more on the relationship, access, frictionless customer experience, and even transformations, as we advocate herein. Other than that, we do not have much skin in the game, certainly not as much as Al Burger. Of course, he charges quite a premium for this level of ensurance. Would you pay it?

One more example, this one again from Marco Bertini, from an article he wrote with Richard Reisman that originally appeared in the December 2018 issue of the Journal of Revenue and Pricing Management (Reisman and Bertini 2018) . It is called FairPay, which essentially gives pricing privileges to customers while allowing the company to rate the fairness of the price set by the customer, and retain the right to make the price revocable. It is not new, the band Radio Head allowed its fans to pay what they wanted, which worked out quite lucratively for them. The TIP clause we discussed in Chapter 17 is close to the FairPay idea, but it is not designed to be used across the entire firm, for all customers.

The question is, would a firm be able to run everything under this FairPay model? Time will tell, but there is no doubt in our minds that we will continue to witness further evolutions in the business models of professional firms. We simply have to raise the bar on the customer experience and focus on what they are buying—transformations.

Undoubtedly there will be ethical and independence issues in the attempt to price for outcomes, and for certain services—such as financial statement audits and other services that require CPAs to be independent—it will never materialize. However, given alternative models of ownership, private‐equity, and other potential external investors into accounting firms, it might become possible. Top 100 accounting firm EisnerAmper spun out its audit function into a separate entity when it received private‐equity funding in 2021, enabling it to have different revenue and business models in the other practice areas of the firm. External investors will not be so attached to old business models, so it will be interesting to see if this drives innovation.

Keep your eyes peeled on the edges, because that is where innovations in business models comes from. Continue to look outside at other industries and professions. Keep an open mind, and take Amelia Earhart's advice to heart: “Never interrupt someone doing something you said couldn't be done.”

TRANSFORMATIONS REQUIRE LIMINAL THINKING

I remember when I first read about the first concierge medical practice, MD^2®. Even though it was founded in 1996, it took me several years to discover this radical new business model. As I discussed in Chapter 9, I did not even have an adequate vocabulary, labeling it retainer medicine, like we labeled the first automobiles “horseless carriages,” borrowing from the old to explain the new.

This model made me quite uncomfortable in trying to apply it to other professional firms. Even though I knew how revolutionary it was, I just could not escape the trap of thinking that our value was determined by the services we stack up for the customer, brick by brick. As these medical practices grew, along with its cousin, direct primary care, it was difficult to ignore. When you see something that challenges your worldview, you are experiencing liminal thinking. As Dave Gray explains in Liminal Thinking: Create the Change You Want by Changing the Way You Think:

Liminal means boundary, doorway, portal. Not this or that, not the old way or the new way, but neither and both. A state of ambiguity or disorientation that precedes a breakthrough to a new kind of thinking. The space between. (Gray 2016)

Human beings are defined by their beliefs, not what they know. Therefore, it is natural that our beliefs are the biggest barriers to changing. It is scary for some people to be at the boundary of the known and the unknown, the past and the future. In a business context, we simply have to get comfortable in this liminal space, since, eventually, we will all get caught in the “gales of creative destruction.” As T.S. Eliot wrote:

Nothing pleases people more than to go on thinking what they have always thought, and at the same time imagine that they are thinking something new and daring: It combines the advantage of security with the delight of adventure.

The problem is, there is no security in the business world precisely because value is subjective, and consumers can change their minds tomorrow. As more and more customers are offered a better experience moving to subscription firms—even if this is just a way station to some other destination—the old model firms will become expendable, and rightfully so. We hope your firm becomes indispensable.

Keep yourself open to liminal thinking. It is a leading indicator that you are going to have some unlearning to do. The purpose of a business is to create wealth for its customers, a process of the inexhaustible human mind and spirit. John Perazzo, in his book The Myths That Divide Us, sums it up nicely:

It requires courage to cast the accumulated myths of a lifetime to the wind. Our natural desire for simplicity, certitude, and the approval of others occasionally causes us to defend even our most flawed worldviews as if our very lives depended on them. Dead belief systems are difficult to bury, for in doing so we enter a world we do not recognize; we watch the carefully crafted towers of our understanding crash down in ruins; and we lose an integral piece of the only reality we have known, reinforced and imprinted on our minds by a thousand voices, internal and external. (Perazzo 1998, p. 17)

The author Gabriel Zaid wrote, “Wealth is above all an accumulation of possibilities.” These possibilities lie hidden in the womb of the future, waiting to be discovered by human imagination, ingenuity, and creativity, manifested in free enterprise dedicated to the service of others. We would not want it any other way.