The Art of Constructive Advantage

Thick value: it’s the foundation of 21st century economics. To create it, you’ve got to do stuff that, at a minimum, is what the economist Jack Hirshleifer once famously called socially useful. Better yet, you’ve got to do meaningful stuff that matters the most, to people, society, and the future.

Here, then, is an example of stuff that’s not:

“Cantor Fitzgerald is one of the biggest brokers of United States government securities, considered among the safest places to put one’s money. Cantor Gaming handles some of the riskiest. It runs the sports book at the M Resort, a relatively new casino popular among Las Vegas locals. It has or will soon start handling the sports betting operations at the Vegas Hard Rock Hotel and Casinoand at the recently opened Cosmopolitan of Las Vegas and the Tropicana Las Vegas, all on or near the Strip.

And Cantor is banking on the next frontier in gambling: a license that would allow sports betting on mobile devices anywhere in Nevada, as long as the bettor had an account at a casino.”

Needless to say, a broker “growing” by investing in (wait for it) mobile betting is the epitome of dumb growth. While you might think it’s profitable in the near term, here’s what’s for sure: it’s unlikely to yield medium term returns, let alone long run returns (because Wall St’s social subsidy, by definition, can’t endure forever—America’s already nearly broke just to the tune of yesteryear’s bailouts).

Nor is it a foundation for global growth: it’s likely that emerging markets might just be looking for financial products and services that are a wee bit more useful to communities starved of capital than squandering it on betting (which is purely socially useless, if not destructive). Like, for example, the P2P lending that’s already disrupting finance in Africa. 

Lesson? 21st century advantage is constructive, not just competitive. It stems from creating thicker value than rivals, by scaling greater heights of social usefulness. Cantor’s seeking an industrial age competitive advantage, by extracting value. A better—and smarter bet—is creating authentic, thick economic value instead.