'In simple terms, pre-commerce is “buying stuff that doesn’t exist yet”. In more grown-up words, it’s a framework for companies to cheaply establish market dema

'In simple terms, pre-commerce is “buying stuff that doesn’t exist yet”. In more grown-up words, it’s a framework for companies to cheaply establish market demand for a new product idea and acquire the cash flow to produce it.' [OP] 'Reported earnings on derivatives are often wildly overstated. That’s because today’s earnings are in a significant way based on estimates whose inaccuracy may not be exposed for many years. The errors usually reflect the human tendency to take an optimistic view of one’s commitments. But the parties to derivatives also have enormous incentives to cheat in accounting for them. Those who trade derivatives are usually paid, in whole or part, on “earnings” calculated by mark-to-market accounting. But often there is no real market, and “mark-to-model” is utilized. This substitution can bring on large-scale mischief. As a general rule, contracts involving multiple reference items and distant settlement dates increase the opportunities for counter-parties to use fanciful assumptions. The two parties to the contract might well use differing models allowing both to show substantial profits for many years. In extreme cases, mark-to-model degenerates into what I would call mark-to-myth.' [http://www.fintools.com/docs/Warren%20Buffet%20on%20Derivatives.pdf http://www.fintools.com/docs/Warren%20Buffet%20on%20Derivati...] ===== When you make assumptions concerning something's value with no concrete immediate exchange of the goods you are valuing [simply put, you are finalizing transactions for things you are not shipping], you are in fact delaying market's feedback and the possible negative consequences this latter can produce to your assets. By employing Pre-Commerce in your model, you are not getting early feedback. You are just betting you will be able to provide in the near future the value you are paid for right now, and you are selling to your customers a burden-share of risks, along with the product you offer. Sure in some occasions you will be able to meet your users' expectations. But if and when you won't, bad things will hit you [and your company] with much greater impacts.