Gross vs. Net Value Creation

This is Kyle’s distinction, framed in his essay The Value Cycle (May 2024): Gross Value Creation counts every good thing a product or service produces, while Net Value Creation subtracts the negative externalities it imposes. As he puts it, “When people crap on venture capital and tech as terrible, it’s because they’re measuring things in terms of Net Value Creation, rather than Gross.” The distinction is the load-bearing idea behind Internalizing Negative Externalities — the argument that large organizations should be made to absorb the costs they impose on workers, users, and society rather than shed them.

The canonical examples are consumer-tech products: iPhones and Facebook generate immense Gross value, but the Net “gets fuzzier once you weigh anti-socialization, addiction, and the child labor in the supply chain.” Kyle’s practical stance is that you usually can’t engineer for Net Value up front: “Typically, it’s too difficult to create a product or service with Net Value Creation in mind… So you build the best product you can and then try to address any negative results that may come as offshoots of what you’ve built.” The framing is also a defense of Venture Capital and tech against critics who, in his reading, are silently measuring Net while crediting only the visible harms — not the Gross value created.

Where this appears

• Internalizing Negative Externalities — built around this distinction; the case for forcing organizations to absorb (internalize) the costs they impose.
• The Value Cycle — Kyle’s essay that originates the Gross vs. Net framing, including the iPhone and Facebook examples.