In the venture capital world, it is widely understood that early stage companies must prioritize customer acquisition and market share capture before dividends. Driven by this nugget of wisdom, Uber, Lyft, Amazon, AirBnb, and many other household brands have operated at a loss for a decade before becoming profitable. Some are still deep in the red. This notion separates day traders from value investors.

But what does it mean to operate at a loss, and could they have been profitable from the very beginning? If so, why haven’t they?

These companies generate revenue. They could have been cashflow positive at any point of their existences by decreasing subsidies and laying off significant portions of their workforce. Yet instead, they chose to subsidize their growth in order to capture larger swathes of the market. If they had ruthlessly optimized for short term profits (⇒ no subsidies) they would have made a small profit, but wouldn’t have grown to these heights—profit optimization can come later, once the brand has implanted itself into the collective subconscious of society.

This line of thinking is the basis of what the DAO should strive for.

  • Sandclock’s mechanisms allow for lossless incentives, using the treasury—collectively owned by QUARTZ holders—in order to perpetually boost yield, outlined below.

  • UMA’s KPI options increase the capital efficiency of QUARTZ distribution, allowing for inflation resistant distribution (and decentralization) of tokens, while simultaneously aligning incentives between DAO and users of the platform.

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