“If you’re not paying for the product, you’re the product” has become a popular line people throw around to discount big tech and the internet economy. Sure, platforms like Google, YouTube, Reddit, and online news are cool and all, but since they’re free, that supposedly means they must be suspicious. As if free products are the only ones with questionable incentives!

Many people operate under the belief that businesses exist solely to sell products to one kind of consumer for direct profit. The whole “you must be the product” mindset assumes there’s some clear line between who’s the customer and who’s the product. But most businesses don’t work that way—the true story is much more interesting than that.

These businesses aren’t just selling products to end-users; they’re designing entire ecosystems where different roles support and subsidize each other. These dynamics create free lunch after free lunch, enabling products and services that, frankly, are too good to be true.

A funny kind of meme that periodically comes up is someone upset tweeting about how they paid for life insurance for years and got nothing out of it, feeling like they were scammed—as if the lucky one is the deceased, not the person who didn’t get the life insurance payout! But the insurance example reveals a deeper truth about modern businesses: sometimes you’re the subsidy; sometimes you’re subsidized — but unlike what the tweeter thinks, these dynamics leave you MUCH better off.

Consider these examples:

• You go to a restaurant and skip the drink list. Congratulations—you’ve just given yourself an effective discount on your meal. The restaurant’s real profits come from marking up alcohol, while your pasta barely makes a dent.
• You book an economy flight to Europe. The airline’s infrastructure—routes, crews, airport slots—exists to serve business travelers paying four times your fare. But they might as well fill the plane, so you get to tag along at marginal cost. Same goes for hotels, which make their money by forcing their catering business on conferences and weddings, but they still like to fill up the empty rooms when they can.
• Credit card companies can offer you large sign-up bonuses and points because they charge merchants steep fees for the privilege of selling goods to you (and, of course, earn from those who are tardy with payments).
• Your discount brokerage provides free trades because it can sell your deal flow and overcharge you on things like foreign exchange fees or other services few people use.
• Insurance companies and banks offer you services to gain cheap access to capital they can invest.

Many businesses are also built on the bet that some people will consume their goods and services in differing amounts. For instance, some gym members go twice per year, while others go 200 times, though both pay the same price. All-you-can-eat buffets, insurance losses, and many other businesses follow similar patterns.

But the genius of this system isn’t merely limited to price discrimination or users who consume too much or too little—it’s the creation of environments where different participants create value for each other in unexpected ways. While you might feel good about the value you get from seeing a movie without buying popcorn or getting free drinks at a casino without losing anything, it’s quite often you who’s providing a business with a free lunch without realizing it.

You might be:

• The early adopter who gives a platform credibility
• The social node that attracts high-value users
• The basic user who makes whales feel special
• The whale who subsidizes the entire platform
• The marginal user who helps achieve network effects
• The inactive member who improves unit economics
• The trendy person who makes an environment seem sexier
• The non-trendy person who, merely by being there, still adds to the ambiance and credibility of the business

In all of these examples, even if you aren’t the primary profit centre for the business, your experience still matters. When a business fails to meet your expectations and you choose a competitor or stop engaging with their services, it disrupts their entire ecosystem—one that depends on a careful balance of different user groups, regardless of how much each contributes.

So yeah, most businesses don’t work the way that most people think they do. And the product/consumer divide isn’t very meaningful. The reality is, we aren’t living in the dystopia that “you’re the product” cynics imagine. The art of creating surplus value through the intricate choreography of different consumer types and price discrimination is actually one of capitalism’s most brilliant creations and something that makes your life much better.