Internalizing Negative Externalities

One-line definition: Kyle’s recurring argument that large organizations should be made to absorb the costs they impose on workers, users, and society — rather than shedding them — captured in the Gross vs. Net Value Creation distinction.

How sources describe it

• From Kyle’s The Value Cycle (May 2024): Gross Value Creation counts every good thing a product or service produces; Net Value Creation subtracts the negative externalities. “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.”
• Examples: iPhones have immense Gross value but the Net gets fuzzier once you weigh anti-socialization, addiction, and the child labor in the supply chain; Facebook the same.
• “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 charge in Unions, Unions Everywhere - Research: large employers “are typically more keen to push off the consequences of their actions, rather than deal with them.” The Square Deal is held up as proof that internalizing those costs and turning a profit were both achievable.

Where it shows up

• Unions, Unions Everywhere - Research — the essay’s resolution to the labor-vs-capital dilemma.

Related concepts

• Unions — the labor-vs-capital dilemma whose resolution this concept supplies.
• Fissured Workplace — the structural mechanism by which large employers shed costs onto workers and contractors.
• The Square Deal — held up as proof that internalizing externalities and turning a profit are both achievable.
• The Value Cycle — Kyle’s essay that frames the Gross vs. Net Value Creation distinction at the heart of this page.
• Venture Capital — the target of critiques that measure tech in Net rather than Gross Value Creation terms.
• Facebook — cited as a product with large Gross value but fuzzier Net value once externalities are weighed.
• Capital Allocation — the broader frame for weighing costs an organization imposes versus the value it creates.