Said once, then refused
A term said before the grip forms takes nothing from anybody, and it sorts a person in the first weeks instead of years later. Said a second time, it is not persistence. It is me declining to read an answer
fundamental transformation
Meaning
An economic shift occurs when a market relationship characterized by many potential partners turns into a bilateral dependency. This fundamental transformation happens because one or both parties make investments that are specific to that unique arrangement. These investments have little value outside the current seat.
The theory describes how the initial competitive advantage of the market disappears once the exchange is locked into a single pair of actors.
Asset Specificity
Relationship-specific investment creates the conditions for the shift. In the record of a founder, the fundamental transformation is the moment when the craft becomes inseparable from the partner. The cost to the person in the seat is the loss of the ability to switch providers without losing the value of their previous work.
This creates a load that makes the arrangement expensive to exit.
Bilateral Lock
Dependency changes the power dynamics of the room. After the fundamental transformation, the terms of the exchange are no longer governed by market prices but by the relative bargaining power of the two people. The witness to this shift is the artifact that cannot be used by anyone else.
This often leads to a hold-up problem where one party demands more because the other cannot leave.
Dependency Limit
Exclusive arrangements define the boundary of the model. The mechanism stops being relevant if the assets involved can be easily transferred to a different seat.