Foundations Series / Vol 01 Est. 2025

Chapter 12: The Economics of Sovereignty — Building the Anvil

Opening: The Business Model Trap

In 2004, a blogger named Ev Williams sold his company Blogger to Google for an undisclosed sum (reportedly millions). Blogger had pioneered user-friendly blogging, giving millions of people their own publishing platforms. But it never found a sustainable business model. Google acquired it, integrated it with their ad network, and kept it alive—but blogger.com users became Google users, subject to Google's terms, surveillance, and whims.

In 2013, Williams tried again with Medium. This time, he'd learned: start with a business model. Medium launched with subscriptions, then experimented with advertising, then memberships, then partnerships. Each pivot changed what Medium was—from open platform to paywalled publication network to algorithmic recommendation engine. Writers never knew if their URLs would persist, if their audiences belonged to them, or if Medium would exist in five years.

In 2023, Medium still exists—but so many writers have left (fed up with pivots and VC pressure) that it's become a shadow of its early promise. The writers who stayed are tenants, not sovereigns.

The Anvil faces a brutal question: How do you build a business that embodies digital sovereignty—one that gives users Declaration, Connection, and Ground—while also generating enough revenue to survive?

This isn't just a technical problem. It's an economic design problem. And it's perhaps the hardest challenge Archaeobytology faces: forging sustainable alternatives to platform capitalism.

This chapter explores:

By the end, you'll understand the economics of the Anvil—and be able to design business models that align profit with sovereignty.

Part I: Why Traditional Models Kill Sovereignty

The Venture Capital Death Spiral

How VC Funding Works:

  1. Startup raises money (seed round: $500k-$2M)

    • Investors buy equity (ownership stake in company)

    • Expectation: 10x return in 5-10 years

  2. Startup grows fast (prioritizes user growth over revenue)

    • Burns investor money to acquire users

    • "Growth at all costs" mentality

  3. More funding rounds (Series A, B, C: $5M, $20M, $100M+)

    • Each round dilutes founders' ownership

    • Investors gain board seats, influence company direction

  4. Exit pressure (IPO or acquisition)

    • Investors want return on investment

    • Company must either go public (stock market) or get acquired (sold to bigger company)

  5. Monetization acceleration (squeeze users for revenue)

    • Ads, data sales, subscription paywalls

    • "Enshittification" (Cory Doctorow's term): Platform degrades user experience to extract value

Why This Kills Sovereignty:

Declaration Dies:

Connection Dies:

Ground Dies:

Case Study: Instagram's Enshittification

Phase 1 (2010-2012): Growth

Phase 2 (2012): Acquisition

Phase 3 (2013-2015): Monetization Begins

Phase 4 (2016-2020): Enshittification Accelerates

Phase 5 (2020-present): Users Rebel

Sovereignty Analysis:

Lesson: VC funding forced Facebook to extract maximum value from Instagram, degrading user experience and sovereignty.

The Advertising Model's Incompatibility

Why Advertising Kills Sovereignty:

1. Surveillance Becomes Necessary

2. Engagement Optimization Dominates

3. Algorithmic Control

4. Real Name Policies

Case Study: Twitter/X Under Musk

Pre-Musk (2006-2022):

Post-Musk (2022-present):

Sovereignty Impact:

Lesson: Even "ideological" ownership (Musk claimed to champion free speech) gets crushed by economic pressure. Debt + ad dependence = sovereignty impossible.

Part II: Alternative Revenue Models

If VC funding and advertising kill sovereignty, what's left? Several models exist—none perfect, all involve trade-offs.

Model 1: Subscriptions (User-Pays)

How It Works:

Sovereignty Potential: ★★★★☆

Pros:

Cons:

Case Study: Hey.com (Basecamp's Email Service)

Launch (2020):

Business Model:

Sovereignty Assessment:

Limitations:

Lesson: Subscriptions enable sovereignty but limit reach.

Model 2: Open Core (Free Software + Paid Hosting/Support)

How It Works:

Sovereignty Potential: ★★★★★

Pros:

Cons:

Case Study: Ghost (Publishing Platform)

History:

Revenue Streams:

Hybrid Structure:

Sovereignty Assessment:

Success Metrics:

Lesson: Open core + hybrid structure (non-profit + for-profit) can work.

Model 3: Cooperative Ownership (User-Owned Platform)

How It Works:

Sovereignty Potential: ★★★★★

Pros:

Cons:

Case Study: Resonate (Music Streaming Co-op)

Model:

Funding:

Challenges:

Status (2025):

Sovereignty Assessment:

Lesson: Co-ops align sovereignty with structure, but struggle to compete with VC-funded giants.

Model 4: Public/Non-Profit Funding (Mission-Driven)

How It Works:

Sovereignty Potential: ★★★★☆

Pros:

Cons:

Case Study: Internet Archive

Funding:

Governance:

Sustainability:

Sovereignty Assessment:

Challenges:

Lesson: Non-profit model can sustain long-term preservation, but vulnerable to legal and funding risks.

Part III: Designing Sustainable Foundries

The Foundry Business Canvas

When designing a sovereignty business (we call these "Foundries"), use this canvas:

1. Value Proposition

2. Revenue Model

3. Cost Structure

4. Three Pillars Integrity

5. Governance

7. Competitive Advantage

8. Growth Strategy

9. Sustainability Timeline

Example Canvas: Hypothetical "Sovereign Social" Platform

1. Value Proposition:

2. Revenue Model:

3. Cost Structure:

4. Three Pillars:

5. Governance:

6. Legal Structure:

7. Competitive Advantage:

8. Growth Strategy:

9. Sustainability Timeline:

Viability Assessment:

Part IV: Case Studies in Foundry Economics

Success: Basecamp (Bootstrapped, No VC)

Business:

Revenue Model:

Economic Design:

Sovereignty:

Key Lesson: Profitability at small scale (relative to VC-funded competitors) enables sovereignty.

Why It Works:

Failure: Ello (VC-Funded "Anti-Facebook")

Premise (2014):

Business Model:

Funding:

What Went Wrong:

Sovereignty Failure:

Key Lesson: VC funding is incompatible with sovereignty, even with legal protections.

Partial Success: Mastodon (Donations + Volunteer Labor)

Business Model:

Rochko's Income:

Instance Funding (Varied):

Sustainability Assessment:

Sovereignty:

Key Lesson: Donation-funded + decentralized can work, but creates admin burnout risk.

Part V: Avoiding the Failure Modes

Failure Mode 1: The Heroic Founder Problem

Symptom:

Examples:

Prevention:

Failure Mode 2: The Volunteer Burnout Trap

Symptom:

Examples:

Prevention:

Failure Mode 3: Speculative Capture

Symptom:

Examples:

Prevention:

Failure Mode 4: Complexity Collapse

Symptom:

Examples:

Prevention:

Part VI: The 10-Year Business Plan

If you're building a Foundry, plan for the long haul:

Year 1: Proof of Concept

Years 2-3: Find Product-Market Fit

Years 4-5: Scale to Sustainability

Years 6-10: Mature and Institutionalize

Beyond Year 10: Legacy

Key Insight: You don't need billions of users or unicorn valuation. Small, sustainable, and sovereign is success.

Conclusion: The Anvil That Endures

Building a Foundry is hard. You're competing against platforms with billions in VC funding, network effects, and zero regard for user sovereignty.

But you have advantages they don't:

The economics of the Anvil require patience:

But you'll build something that lasts. Something that users own. Something that can't be murdered by a quarterly earnings call.

The Anvil endures not because it grows fastest, but because it's built to survive.

In the next chapter, we explore distributed commons governance—how to build infrastructure that many organizations share, using Elinor Ostrom's principles for managing common-pool resources.

For now, sketch your Foundry. What would you build? How would you fund it? And how would you ensure it embodies the Three Pillars while remaining economically viable?

The Anvil awaits the forging.

Discussion Questions

  1. VC Dilemma: If you had a great idea for a sovereign platform but needed $1M to build it, would you take VC funding? Why or why not? What alternatives exist?

  2. Subscription Exclusion: User-pays models exclude people who can't afford subscriptions. Is this an acceptable trade-off for sovereignty? How could you address it?

  3. Co-op Governance: Would you want to run a platform democratically (co-op model)? What are the benefits and frustrations of democratic governance?

  4. Small vs. Big: Is it better to be small and sovereign (10,000 loyal users) or big and compromised (100 million users but VC-funded)? Does scale matter?

  5. Competition: How do you compete with "free" platforms (Gmail, Facebook, Instagram) when you charge money? What's your value proposition?

  6. Your Own Business: If you built a Foundry, what would your revenue model be? Walk through the Business Canvas for your hypothetical platform.

Exercise: Design Your Foundry

Task: Design a complete business plan for a sovereignty-respecting platform.

Part 1: The Problem (300 words)

Part 2: The Business Canvas (1000 words)

Complete all 9 sections:

  1. Value Proposition

  2. Revenue Model (with unit economics)

  3. Cost Structure

  4. Three Pillars Integrity Check

  5. Governance Model

  6. Legal Structure

  7. Competitive Advantage

  8. Growth Strategy (with realistic numbers)

  9. Sustainability Timeline

Part 3: 5-Year Financial Projection (500 words)

Create a simple table:

Year Users Revenue/User Total Revenue Total Costs Profit/Loss
1 50 $120/year $6k $50k -$44k
2 500 $120/year $60k $100k -$40k
3 2,000 $120/year $240k $200k +$40k
4 5,000 $120/year $600k $400k +$200k
5 10,000 $120/year $1.2M $700k +$500k

Explain assumptions. When do you break even? Is this realistic?

Part 4: Failure Mode Analysis (500 words)

Part 5: Reflection (300 words)

Further Reading

On Platform Economics

On Alternative Business Models

On Sustainable Funding

On Company Case Studies

On Business Design

End of Chapter 12

Next: Chapter 13 — Distributed Commons Governance (The Seed Bank)