Thinks 513

Sangeet Paul Choudary: “In the midst of all the hype and buzzword soup that plagues Web3 discourse today, the answer to this lies in reshaping our mental models about network effects. What we’ve learnt in a Web2 world (covered in my book Platform Revolution) may not apply as directly in a Web3 world. To understand network effects in a Web3 world, it’s helpful to rethink network effects from first principles and understand what changes as we move from Web2 to Web3.”

Matt Levine: “Here is how an algorithmic stablecoin works. You invent two tokens, call them Dollarcoin and Sharecoin. You list them on the crypto exchanges. Sharecoin trades for whatever price is determined by supply and demand. It might be $0.01 per Sharecoin, or $1, or $100, who knows. But Dollarcoin is supposed to trade at $1. If it trades at $0.99, you have some automatic process in which you print more Sharecoins and use them to buy Dollarcoins until it is back to $1. If it trades at $1.01, you have some automatic process in which you print some more Dollarcoins and use them to buy Sharecoins until it is back to $1. The result is that Dollarcoin is firmly pegged to the dollar. The process is sometimes compared to algorithmic central banking, where the central bank maintains the value of the currency (Dollarcoin) by adjusting its supply.”

Divvy’s interesting business model: “A consumer selects the home of their dreams, which Divvy buys and rents back to them. A portion of every rent check is used to build consumer equity in the home, resulting in approximately 10% ownership after three years. At the three-year mark, the consumer may choose to buy the home from Divvy (using that 10% equity as a down payment) or cash out their savings.”

Thinks 512

Christopher Penn: “Look at every proposed trend and technology through the lenses of mobility, frictionless interactions, and making consumers think less. Machines and technologies are advancing at incredible rates, developing powerful new capabilities, but the flesh and blood humans at the end of the value chain haven’t changed much at all. Align yourself with the things that the humans want, and evaluating up and coming trends and technologies becomes much easier.”

Jonathan Haidt writes why the past 10 years of American life have been unique stupid. He ends with: “When Tocqueville toured the United States in the 1830s, he was impressed by the American habit of forming voluntary associations to fix local problems, rather than waiting for kings or nobles to act, as Europeans would do. That habit is still with us today. In recent years, Americans have started hundreds of groups and organizations dedicated to building trust and friendship across the political divide…We cannot expect Congress and the tech companies to save us. We must change ourselves and our communities.” A different view.

Steven Johnson: “OpenAI’s GPT-3 and other neural nets can now write original prose with mind-boggling fluency — a development that could have profound implications for the future…GPT-3 belongs to a category of deep learning known as a large language model, a complex neural net that has been trained on a titanic data set of text: in GPT-3’s case, roughly 700 gigabytes of data drawn from across the web, including Wikipedia, supplemented with a large collection of text from digitized books.”

Thinks 511

Stephen Johnston: “While NFTs have shaken up media and entertainment, DAOs – Decentralised Autonomous Organisations – seem to offer the potential to shake up organisations across all sectors, large and small. They’re self-managed, internet native communities, owned, governed and operated by their members (generally holders of the DAO’s token).”

David Brooks: “Globalization is over. The global culture wars have begun…Most people have a strong loyalty to their place and to their nation. But over the past few decades many people have felt that their places have been left behind and that their national honor has been threatened. In the heyday of globalization, multilateral organizations and global corporations seemed to be eclipsing nation-states. In country after country, highly nationalistic movements have arisen to insist on national sovereignty and to restore national pride: Modi in India, Recep Tayyip Erdogan in Turkey, Trump in the United States, Boris Johnson in Britain. To hell with cosmopolitanism and global convergence, they say. We’re going to make our own country great again in our own way. Many globalists completely underestimated the power of nationalism to drive history.”

Arthur Brooks: ” If we want any chance at persuasion, we must offer [our values] happily. A weapon is an ugly thing, designed to frighten and coerce. A gift is something we believe to be good for the recipient, who, we hope, may accept it voluntarily, and do so with gratitude. That requires that we present it with love, not insults and hatred…Launching a rhetorical grenade might give me a little satisfaction and earn me a few attaboys on social media from those who share my views, but generosity and openness have a bigger chance of making the world better in the long run.”

Thinks 510

Anticipating the Unintended: “Spontaneous orders aren’t planned by anyone. There is no intentional coordination of actions by any external agent. Every participant acts in their individual best interest for their own objectives. However, these individual actions aggregate into a pattern of their own. It is the ‘unintended order of intentional action’ that emerges on its own and it adapts to the ongoing changes. Language is a classic example of this. No one individual could have designed it. There’s no central design of associating a sound with an object or an emotion. It evolves by the attempt of separate individuals trying to solve the problem of communicating with one another. The sounds that are easy to use and adopted by most individuals evolve into the lingua franca of the community. Language is ‘the result of human action, but not of human design’. As the language becomes more widely adopted, there are attempts to formalise its structure and syntax. As these structures become more rigid and people are forced to use a language in only a certain way, it begins losing its flexibility and its utility. People find a more flexible mode of communication and a new order emerges. A new language of the people is born. This is how Latin, Sanskrit, and Persian continued to be the languages of the church, court or the temples but the continuing rigidity of their grammar and their top-down imposition on people led to their decline. Spontaneous order killed them off.”

John Reed: “When you first start to study a field, it seems like you have to memorize a zillion things. You don’t. What you need is to identify the core principles – generally three to twelve of them – that govern the field.” [via Shane Parish]

Gavin Baker: “Today’s unprofitable tech companies are so much better than the ones back then. Many of them are Software as a Service companies where we know that the business model works. They have immense control over their P&L. You have seen some of them take their free cash flow margins up 80-90% in two quarters. They can be profitable whenever they want. They’re making a conscious trade-off between growth and profitability, and when they tilt towards more profitability, they don’t stop growing, they just grow slower. So it’s wild to me that you’ve had a move comparable to the year 2000 crash in non-profitable tech companies. Their forward multiples have compressed at least as much if not more, but they are great businesses, they’re not missing their numbers…David Sacks, a co-founder of the venture capital firm Craft Ventures, said it aptly: For around twenty years, all these companies had to do was to take any business process that’s done on Excel or uses a fax machine, create a web or app-based software version of that business process, run it on AWS – and presto: you have a multi-billion software applications company. Obviously there is more to it than this oversimplification, but the point stands that it has become easier to build application software and that world has steadily gotten more and more competitive on a category by category basis.”

Thinks 509

The Economist: “Mr Xi’s strategy is best understood as a weighty bet that China is on track to become the world’s centre of innovation over the next decade. A shift towards homegrown tech is altering the geographical layout of China’s manufacturing machine. New investment and migration are being rerouted from rich coastal hubs to inland cities such as Zhuzhou. A second feature is an unprecedented rise in the number of new tech companies. The government is nurturing thousands of groups, big and small, in the fields of data science, network security and robotics. Mr Xi and his advisers are also taking firmer control over markets. Their ability to direct capital flows is already evident in how private-equity groups invest in China…Mr Xi is building an incubator state: an economy that relies heavily on government nourishment to create productivity gains with domestic research and technology. In doing so he is also signalling a premature break with the technological convergence that has served China well since the 1980s.”

Matthew Hennessey: “If a society can bear to hear the unmistakable sound of what the mid-20th-century Austrian economist Joseph Schumpeter called the “perennial gale of creative destruction,” then it can be pretty sure its markets are working as intended.” [via CafeHayek] Donald Boudreaxu: “Markets aren’t set into operation by anyone’s design or intent, so strictly speaking there is no intention – no purpose – that markets can be said to fulfill or to disappoint. But because what most people want from markets is the provision of high and rising standards of living for ordinary people, when and insofar as markets make such a provision, markets are operating as we ‘want’ them to operate.”

Shane Parish: “Today, not tomorrow. What you avoid today is harder to do tomorrow. Today’s choices become tomorrow’s position. If you put off things today, they don’t magically disappear tomorrow. They just get added to the list of things you want to do. Don’t wait till tomorrow. Tomorrow is where dreams go to die.”

Thinks 508

Roosevelt Montás: “One can begin by recognizing that the present has a past; that the categories, the institutions, the ethical norms, political procedures, economic structures of society—all of that has a history. And understanding that history is the most empowering kind of education if you want to alter, to intervene in, to adapt the current world. To understand that past means looking at its sources, and its sources are sometimes called “the classics,” sometimes called “great books.” This doesn’t only mean poetry—it also means documents, debates, and philosophical treatises. But there is a whole kind of humanist tradition of debate, expression, and artistic exploration that lies at the foundation of our society. The best way to educate a human being to be a conscious, effective agent in our society, is to acquaint them with that history, and there are no better tools than the tradition that’s associated with classics. Now, it’s a tradition that we’re always revising, we’re always discovering new classics and we’re always finding new ways of reading them. We’re always discovering new questions and new information that contextualize what they mean. All of that is salutary and necessary and part of what the classics, in fact, prompt and give an occasion for.”

Veronique de Rugy: “inflation isn’t caused by corporate greed. Readers of this column know by now that it’s caused by government’s excessive deficit spending, fueled in part by loose monetary policy. Therefore, getting rid of inflation requires an increase of interest rates theoretically higher than the current inflation, along with some overdue fiscal discipline. Reforms like deregulation that promote faster growth in the supply of goods and services would also help. What we don’t need, but what we’ll likely get, is more government spending and more debt accumulation. The result will only fuel the inflation fire.”

WSJ: on the everyday patriotism of diverse democracies: “Civic principles matter, but love of country in the modern West is largely based on affection for ordinary life, from food and holiday customs to sports teams and local geography.”

Thinks 507

The Economist on innovation hubs: “Younger innovation hubs, including Bengaluru, São Paulo and Singapore, look a bit more alike in that their focus is regional rather than global. Instead of breaking new ground they often adapt existing business models to local market conditions. As disposable incomes rise in new regions, consumers become willing to pay for similar “technification of services”, says Peng Ong of Monk’s Hill Ventures, a Singaporean VC firm. Anand Daniel of Accel, a Silicon Valley VC firm, calls this the “X of Y” playbook. And so Flipkart (e-commerce) is the Amazon of India; Nubank (fintech) is the Revolut of Brazil; Grab (ride-hailing) is the Uber of South-East Asia. This helps explain why 70% of South-East Asian unicorns and 80% of Latin American ones are either in fintech or consumer internet. Still, hyper-localisation means each hub is distinct.”

FT on Baillie Gifford’s James Anderson: “Anderson runs through some of the big academic influences on Baillie Gifford. There’s Hendrik Bessembinder, a professor at Arizona State University, who found that over many decades the vast majority of stock market returns come from a tiny percentage of business. Another is work by the Santa Fe Institute in New Mexico, which demonstrated that today’s knowledge-based companies tend to exhibit increasing returns to scale: that is, returns of the winners have become exponential rather than linear. He says that all of this emboldened Baillie Gifford to try to identify as many of the “outlier” companies as possible — very different to most fund managers who have a diversified portfolio of bets.”

Russ Roberts: ” I think most people think–when they hear the word ‘liberal’ education–most people don’t know what liberal arts education is. It’s usually misunderstood. But, what I mean by it is the study of philosophy, literature, and history. But, it’s more than that. It’s grappling with the great ideas that are embodied in those fields in a way that is different than you might learn, again, a preprofessional skill. And, I think it’s easy to misunderstand what those fields are about.”

Thinks 506

James Pethokoukis: “What are America’s greatest economic assets? Certainly our democratic capitalist system — democracy, rule of law, property rights, the price system — would be at the top of that list. But then what? Lots of candidates, from our vast natural resources to our world-leading university system to our ability to attract the very best of global talent. And, of course, the existence of some assets affects others. Our largest technology companies are the economy’s crown jewels, but they wouldn’t exist if not for some of the above factors, among others (immigration + universities + property rights + California weather). Here’s another asset: the American venture capital industry.”

Martin Casado: “Ten years ago, if you started a software project, you really didn’t know if you were going to complete it. It was more art than engineering. Certain people could do it and certain people couldn’t, and it was hard to outsource. Now, with all of the tooling built around it, cloud, mobile, containers, all of these things…if you start a software project, it will almost certainly be completed, and it will be done better and faster than before. The question has moved from can you build it to how effective will it be. We never ask founders if they can build software anymore. We know they can. It is more, how does software use data to create features and differentiation? If you assume anyone can build software and build it with success, then the next question is who can extract the most interesting features? It often becomes a data problem, much more math, statistics and science than engineering. It feels to me like the engineering problem is mature and we are now in the realm of math, science, statistics.”

FT reviews “How Religion Evolved”: “The first [urge] is our need to bond. Humans are highly social animals but there are ceilings above which the usual means of primate bonding cannot go. There’s only so much time in a day to groom one another. In the absence of such mechanisms, our ancestors developed certain shared practices — singing, dancing, eating, storytelling — which, when done ritually or in synchrony, have the same bonding effect. Although many evolutionary biologists claim that religion is an unintended consequence of evolution, Dunbar is clear that religious practices improve the individual’s “fitness”. “[A]ctive involvement in religion both makes you feel happier and provides you with a level of support that helps you cope.” In effect, one of the origins (and engines) of religion lies in its capacity to keep us healthy and together.”

Thinks 505

Alexander Salter: “By his own admission, Matthew Hennessey is an unlikely author of an economics book. He has no experience in business, accounting, or finance. Until fairly recently, he was quite intimidated by the dismal science. Yet he’s managed to become the Wall Street Journal’s deputy op-ed editor, so he likely knows a thing or two about markets. Over the course of 200 entertaining pages, he proves it. Visible Hand is the elementary economics book we’ve been waiting for. I don’t mean it’s an Econ 101 text of the kind college freshmen wearily slog through. It’s something much more important: an everyman’s introduction to how property rights, prices, and profits and losses make the world go ‘round. I hope we can get copies of this book in the hands of every high school senior in the country.”

Rahul Krishnan, Arjun Rakesh, and Ruchin Kulkarni: “OnlyFans was able to onboard a large number of creators by offering a lucrative referral program that incentivized content creators to invite others from their social and professional circles. The program guaranteed a 5% cut up to $1M from the referred creator’s earnings for anyone who refers others to the platform. There were no limits to the number of creators one can refer, nor the total referred earnings. The referral program was a huge success. Bear in mind that whereas on Uber and Airbnb, making money is linear, on OnlyFans it is multiplicative.”

Leif Abraham: “Canonical advice for builders is to start by building an MVP or “Minimum Viable Product.” We try and get our teams to focus on a different first step, creating a “Minimum Marketable Product” or MMP.  What’s the difference? A lot of the time, builders confuse MVPs with prototypes and/or focus solely on the feature set. MMPs get away from this framing by including several other factors in the process. When you’re building an MMP you have to take into account factors like design, branding, and positioning.  The result is that MMPs are actually sellable. They’re compelling enough to attract real customers. Moreover, because of the extra care that goes into an MMP, they create a good first impression. I believe it’s extremely hard to change someone’s opinion of a product after that first encounter.”

Thinks 504

The Economist reviews “The Age of the Strongman”: “The harm is not just to the people they oppress or the national political systems that they corrode. Strongmen also chip away at global institutions, international norms and multilateral co-operation. Many are suspicious of free trade. Few are inclined to endure much inconvenience to curb climate change. They are prone to adventurism and aggression in foreign policy.”

Debashis Basu: “Look at the extortive power of the state when it comes to paying tax or when it loses a major legal battle. Successive governments have made unjust tax demands, lost in court, and then promptly changed the law! Businessmen and citizens must always lose. In infrastructure projects, subsidies and arbitration awards are withheld, causing a cash crunch and bad loans, but no one is held accountable. When Narendra Modi asked thousands of assembled youngsters in an election rally “Apko naurki chahiye ki nahin chahiye?” (do you want jobs or don’t you?), he was surely not promising them government jobs. From small restaurants to mighty software companies, it is businesses, not the government, that create jobs. Yet, in a cruel irony, they have to fight extortive and brutal state power every step of the way. Why are they silent?”

Neri Oxman: “The idea behind material ecology is to enable total synergy between grown and built environments by deploying new digital technologies that allow us to augment bio-based materials for large-scale construction…We work with the most abundant biopolymers on the planet which include cellulose, found in plant cell walls; pectin, found in apple and lemon skins; and chitin, found in the shells of crustaceans…Using technology, we can program biomaterials to degrade in response to changing environmental conditions. At MIT, we built three biopolymer pavilions [the Aguahoja pavilions] which, instead of concrete, were built using shrimp shells, fallen leaves and apple skins. We programmed the pavilions to decay at a certain point when exposed to rainwater. This, in turn, nurtures soil microorganisms to fuel new growth.”