The Political Economy of Web3 Hype

Like many technology enthusiasts I have watched the hype surrounding web3 build with interest. I have found it particularly interesting to read often opposing takes from people I admire and trust. This short-ish essay (it clocks in at ~1,200 words) is not an attempt to convince you about web3 in either direction. I am wholly unqualified to do that. The question that I want to try and answer is, what are the forces driving the hype we are witnessing?

Chasing the Gale of Creative Destruction

Writing in the 1940’s the Austrian economist Joseph Schumpeter argued there was a force unique to an economy under capitalism that regularly destroyed the value created by existing markets. He called this creative destruction and described it as law of nature, evoking images of the destructive power of natural phenomena such as the wind and waves.

He proposed that some new innovation was the root cause of this phenomenon. An innovation that completely altered the operating logic of existing markets, and had the power to replace incumbent companies with new ones poised to take advantage of the change. There is a quote that sums this idea up nicely:

…the competition that matters arises not from additional shops of the same type, but from the department store, the chain store, the mail-order house and the supermarket.

Former British Prime Minister Tony Blair once said that you “don’t win elections by telling people things are being destroyed” which highlights how misunderstood the term creative destruction is. There is no doubt that many in the path of creative destruction will lose out, but this is just one side of the coin. Schumpeter was clear that creative destruction simultaneously creates value in the form of new customer propositions, new jobs and, of course, shareholder return.

In short, creative destruction creates new markets and redefines the leading firms. If you’re an investor searching for the next crop of trillion dollar companies and feel the gale of creative destruction on your neck, you start deploying capital accordingly.

The Science of Disruption

Creative destruction doesn’t have to spell doom for market leaders. The late Clayton Christensen re-conceptualised Schumpeter’s ideas in the form of a management doctrine called ‘disruptive innovation’ that provided companies with a framework for kickstarting revolutions from within their own ranks. It’s better to disrupt yourself than to be disrupted by someone else after-all. 1

We can see examples of Christensen’s influence in many places: “labs” or skunkworks projects inside otherwise fairly pedestrian organisations; products that are sunset before escaping ‘beta’ status; Zuckerberg’s announcement that Facebook was now a “metaverse” company was met with a lot of ridicule, but there is some degree of respect due to a founder who is willing to bet so big on a future technological landscape that could easily unseat Meta if it caught them flatfooted. 2

Few companies are better versed in the art of disruption than the GAMMA set. Each of them are living examples creative destruction’s power and acutely aware of the rapid change that can follow the deployment of some new innovation. Add a disruptive culture to the vast quantities of data and the huge networks GAMMA possess and the future looks pretty bleak for startups operating within their orbit. If you were an investor, would you want to put money into a company when the competition includes the likes of Google, Meta, Amazon etc?

Enter the Blockchain

Which brings us to the blockchain. Firstly, whether you call it disruptive innovation, or just innovation, it’s clear that the blockchain, with the important inclusion of smart contracts executed on the blockchain, satisfies the criteria. One, it’s a genuinely new invention, and two it comes with a new value exchange model – tradable crypto-tokens. More importantly, the blockchain represents an innovation that the GAMMA set cannot simply spin out of some labs project. It fundamentally alters their value creation model which relies on centralised databases that they alone have control over.

I liked how Albert Wegner from Union Square Ventures (USV) referred to this concept as ‘permissionless data’ in his well read post on the same topic. Put simply, today databases are controlled by central authorities who have the final say over read/write access. In a world of blockchain based databases everyone has read/write access. It flips GAMMA’s centralisation paradigm on its head.

Technologies of Freedom

Centralisation, or more importantly, de-centralisation is the final theme of significance in this story. Code and digital networks have a long history here. From the earliest moments of modern computing similar assertions have been made about the Promethean like powers the technology can or will unleash. Indeed, the history of technology writ large can be viewed through a lens of its emancipatory abilities. New tools provide people frustrated by the laws or diktats of some authority new ways to circumvent them.

Here the blockchain is no different. Indeed, it’s often hard to decouple the innovation that is the blockchain from the enthusiasts who argue it will catalyse a new period of societal change. But again there is history here, first in terms of the technology’s origins during the 2007/8 financial crash and the recession that followed. And second, as a continuation to the seam of techno-libertarianism that runs through engineering culture and Silicon Valley. I highly recommend Camilla Russo’s book ‘The Infinite Machine’ for an overview of this and a longer history of Ethereum.

There are also some lesser, but still relevant issues at work here. First, many venture capital firms aim to create their own media platforms in order to champion the companies they invest in and the founders building them. Part of the rationale for this is immense challenge of quickly scaling companies in a brutally competitive labour market. One crypto-investor told me recently that the combination of already high salaries in tech and the lack of people versed in the crypto stack was resulting in salaries that would even make GAMMA’s eyes water. Irrespectively, the point here is that the venture capital media machine actively contributes to the hype we are witnessing. A second contributing factor is the new-ness bias that engineers have. Engineers like to play with the shiniest stuff and there are few things shinier than the blockchain. Even if you have no idea what a cypherpunk is, interest in the new cool thing contributes to the buzz surrounding a new piece of tech. Finally, we cannot disregard the huge amounts of money that have been made speculating on crypto assets. Newly acquired wealth validates beliefs, even if there is little to link the two.

Interest Convergence

So where are we? Well, we’ve described three phenomena: creative destruction and the hunt for new markets and the companies that will lead them; the blockchain innovation and how it presents a novel way to attack the GAMMA set; and finally the passion aroused by a technology that has the potential to wrestle power away from those who have it.

I think it’s important to recognise that these forces do no overlap perfectly. Not all investors are also championing the techno-libertarian cause. Same goes for the engineers. Some are just chasing the money, some care only about stemming the power of GAMMA, some are just interested in a new way to make apps. But this doesn’t matter if there is a sufficient degree of interest convergence. Put another way, if the forces overlap enough, the hype it can generate will be pretty deafening.

As I stated in my introduction, I am not trying to justify the hype we’re witnessing. But I do believe that the forces I’ve outlined provide an effective explanation for it. As for the next era of the web? Well, we’ll have to wait and see. One thing I am pretty confident of however, is that hype is rarely sustained. Much like the markets, technology is known to go through down cycles. I wonder if the next crypto-winter is right around the corner?


1. The Harvard historian Jill Lepore first drew the parallel between Schumpter and Christensen's work in an article for The New Yorker. I think she is too dismissive of Christensen's work, however.

2. To be clear I find Meta's move into the metaverse to be deeply cynical and I have written on this blog about exactly that.


The Panoptiverse

Shortly after the Facebook Connect keynote, the one where Zuckerberg introduced Meta and their vision for the Metaverse to the world, a meme did the rounds:

Lots of gesticulating and the word experiences over and over again. It was pretty funny.

People were right to poke fun at this. Zuckerberg said the word experience 43 many times during the course of his 75 minute presentation. However, I was more interested in the number of times he talked about work. In fact, when you remove references to the work required to build the metaverse, work in the metaverse was mentioned 23 times. 1 Curious when you consider that Meta isn’t a company one would closely associate with the nine to five.

But there was good reason for this. If you go back to basics on what drives Meta’s business model you’re reminded that it’s essentially a massive advertising platform where our attention, and the data that can be inferred from it, is extracted, processed and used to sell advertising space. Meta have proved to be the best in the world at converting the data they collect about us into advertising, and yet despite this, the gains that can be made from more accurate targeting are likely to have been diminishing for some time. If you want to make a lot more money, you need a lot more attention.

Somewhat simplistically you can divide the attention Meta has right now into two buckets — communication and entertainment. While these are significant chunks of our daily lives, they are dwarfed by the time we spending working. A platform shift may well be coming, but if Meta only replaces the Instagram on your phone with Instagram on your new AR/VR goggles the size of the pie doesn’t necessarily get much bigger. If the platform shift includes an ability for them to facilitate our time at work, the platform shift has not only been successfully navigated, it’s also been a huge growth story. More of the attention pie, more data, more ad dollars. It all makes sense, right?

The Panopticon

Back in the 1800s the British utilitarian philosopher Jeremy Bentham developed the concept of a Panopticon. The Panopticon was a prison in which a single guard could watch over all the prisoners from a control room by virtue of its clever room design. Michel Foucault reignited interest in the Panopticon when he used it as a metaphor for the state, and internet theorists have long been fascinated by the idea of the Panopticon and its relation to the evolving web. In the 90s Mark Poster argued that the connected web of databases that form the Internet represents some kind of “super-panopticon” one that doesn’t have a clear centre, and when social media first emerged during the early days of Web 2.0 it was considered to be a reverse panopticon, one where the user was the centre and everyone watched. But then, as our understanding of the technology developed, Christian Fuchs argued that social media was in fact a classic panopticon, as it was Facebook (now Meta) themselves who sat in the control room watching over us all.

What is so nightmarish about Bentham’s design is the totality of it. The prisoner is incarcerated in solitary confinement giving the controller an unrestricted view of their daily life. Putting to one side the debate over whether we have a choice to engage with social media or not, our attention is still limited by its ability to facilitate communication and entertain us. At some point, most people need to go to work. So while Fuch’s was right when he argued that social media was analogous to Bentham’s classic work, there was still an obvious limit. But if Meta can make your work a central part of the metaverse, if work becomes more “social”, their slice of your attention has just increased dramatically. You might not have reached gargoyle level, but you’re one step closer to the Panopticon — the Panoptiverse maybe?

The Guards Problem

One of the things that often gets over looked when discussing the Panopticon is that Bentham was, in part, interested in the question of who guards the guards? James Crimmins explains how, to this end, Bentham developed “the inspection principle” that would ensure that the warden and their subordinates would be subject to public observation from time to time. Bentham thought the close observation of the prisoner would help root our bad behaviour, but he recognised that this went both ways. If the guards weren’t watched as well, what was to stop them acting irresponsibly? 2

The complete failure of governments around the world to successfully regulate social media suggests that 200 years on from Bentham and we’re still struggling with the guards problem. What is more, given the hugely complex issues surrounding the safe implementation of digital worlds. And a business model that ties time spent online with profit so ruthlessly. It feels to me like we should be both concerned by Meta’s expansion into the metaverse, and reject the notion that they can govern themselves effectively.


1. You can read the full transcript of the keynote presentation on Rev.

2. Crimmins, J. E. (2017) 'Panopticon', in Crimmins, J. E. (ed) The Bloomsbury Encyclopedia of Utilitarianism.


Literal and some thoughts on online book clubs

Completing my master’s research and the birth of my daughter has provided me with a lot more time to read. Importantly, it’s also allowed me time to read purely for pleasure. This is not to say that reading academic papers isn’t pleasurable, but let’s not kid ourselves and pretend it’s the same as reading the latest David Grossman.

With the extra time on my hands I’ve also had time to check out Literal, a new-ish app that I found via Dense Discovery and could be clumsily described as an indie Goodreads. In fact, if you’ve been clamouring to break away from the Amazon owned visual mess that is Goodreads, feel free to make use of one of my invites. They even have an importer so you can transfer your library from one site to the other.

All the features you’d expected are there: book search, ratings, reviews, a personal library and a follow based social network. By following people you create a feed of updates that includes what they have added to their library. Just like Goodreads, its a great way to find new books and no doubt a recommendations algorithm based on your interactions is on the way too.

Literal Book Clubs

The team at Literal are putting a lot of energy into their new book club feature which they suggest will become central to the Literal experience over time. Right now, the feature is pretty basic. It includes a feed in which only the “owners” of the club can add books, but where all club members can add content related to those books – reviews, quotes, opinions etc. It’s essentially a closed version of the main feed.

Despite this relatively underdeveloped first release, news of the feature has been enough to get me excited about the possibilities well developed online book club. I’ve been a member of a few real world book clubs during my time, and while I’ve found them all stimulating, it’s often hard to find a group of people who share similar interests. 1 The web is good at solving this problem, so the question then becomes, what feature set would a great online book club have?

One book at a time

A key issue I have with the current implementation of Literal’s book club is that members can discuss any book added to the club at any time. This means that it’s pretty easy to see spoilers or get the thoughts of another member before you’ve had time to digest the book yourself. From my experience, book clubs tend to have one of two books that the group is actively reading and there is an embargo on conversation until some agreed date in the future. Members of the club could still create content about the books being read in their own time, but this wouldn’t be revealed to the rest of the group until after the embargo date.

Make an event of it

If you’ve spent even a small amount of time on Discord or Clubhouse you’ll have seen the potential for live audio rooms to facilitate online book clubs. Agree a time in the future for the club to get together and discuss the books being read. Create a stage which a few members of the club “host” and bring up other members of the group to share their thoughts. If it sounds like a lot like an IRL book club meet up, well that’s because it is. The live audio format works incredibly well in this regard. This concept dovetails nicely with the few books at a time model too. The meet up acts as the moment at which the book is no longer embargoed and all the content created by the group’s members can be viewed by others.

A club library, not a feed

I understand why Literal would make a feed core to the club but I think a shared library is more appropriate. A feed runs into the problems of spoilers discussed earlier, where as a shared library, in which a member chooses which book they’d like read the group’s opinions on, requires an active choice. It also supports the embargoed book feature, as that part of the library wouldn’t be accessible until after the meet up. I can see each book within the club’s library getting an awesome dedicated page in which you can access the audio from the meet up (for those who couldn’t attend live), see the breakdown of the group’s ratings, read reviews and interesting highlights.

A rough wireframe of a Literal Club with shared library

Clubs as a route to monetisation

There are a couple of obvious routes to monetising a network of global online book clubs. Affiliate networks will enable you to take a cut of books purchased via one of their links, and advertisers will be interested in targeting the audiences that form around different genres. Both, however, have the possibility to muddy the product as you inevitably start linking to Amazon (yawn) and including banners on the site (yuk).

I wonder if clubs offer an alternative route to monetisation. Clubs, at least in the way I’ve described them above, have a meaningful infrastructure cost and so it would be reasonable to make them a paid feature which scales as you join more. Paying users could also get access to exclusive events – I could imagine authors joining live audio rooms to promote their books – and also have all those annoying ads removed.

A seminar substitute?

One part of post-grad life I particularly enjoyed was a lively seminar discussion. They were so much more rewarding than during my under-grad when just getting people to read the core text was a challenge. At post-grad people cared about the subject matter and had opinions they wanted to share. A book club formed around a specific interest or genre has much of the same appeal, but with a much lower cost!

I am certain that my recent university experience is influencing my thinking here, but I believe that paying a small subscription fee to access the clubs feature would appeal to a group of people who want to share their interest in a subject matter on a deeper level. It’s not quite university, but it’s a form of continuous learning that might be a bigger niche than it first appears.


1. I should note that often one of the best things about a book club is reading outside of your comfort zone because you share the club with people of different interests.


Thoughts on six months of further eduction: Covid, distance learning and degree supply

A few months ago the taught portion of my master’s came to an end. This felt like a good moment to reflect on my experience as a student. What’s changed since I did my undergrad in 2003? How I was impacted back Covid? And what that might mean for students and universities in the future?

Travel

The lack of travel required by an entirely online course has been a huge advantage for me. For context, I look after my son one day a week giving me four days for the course. Most taught programmes at King’s consist of three modules per term (the final term is for research) and each of those modules is formed of a weekly one hour lecture and one hour seminar. The Strand campus is about 45 minutes from my house which means I’ve saved at least an hour and a half each day commuting – more when you factor in moving between rooms and chatting with other students and the teaching staff.

Reading

Reading is the area of academic life most different from when I did my undergraduate degree. Many academic journals were online back in 2003, but renting out books was slow and tiresome. You’d see students dashing for the library to get out one of the four copies of a core text, and then sit on them for an entire term. Today, most are available to rent digitally and for those that aren’t, you can usually purchase the e-book or resort to piracy. Getting to the library during Covid has been challenging for obvious reasons, but even in “normal times” the digitisation of reading material would have meant I was unlikely to visit that often. And, more to the point, it has made a core part of the academic experience significantly more accessible.

Lectures

The format of lectures during my undergrad was pretty dull. A lecturer speaks for an hour and students furiously note-take hoping that they got everything down. There might have been a few questions, but they were limited due to time constraints. From my understanding master’s lectures are more participatory, but still suffer from time constraints and the rigidity of everyone being at a time and place to experience something that could be easily delivered in an asynchronous fashion.

Irrespective of Covid, pre-recorded lectures are big leap forward. I can chose to watch the content when I like; I can pause and rewind to ensure I have understood the points being made; I have enough time to make notes; and I can access automated transcripts to search through at a later date. I have also been prone to listening to much of a lecture at 1.5x speed. In fact, there are lecturers at King’s whose voices I only recognise at this pace!

In my experience lectures aren’t dynamic teaching environments. They are about the successful transfer of knowledge from lecturer to the student. A pre-recorded lecture is, in my opinion, a much better vehicle for this. And, should a student have a question about the content, there should be fora for them to do this – more on that later.

Seminars

Seminars by comparison should be dynamic, collaborative, discursive and reflexive learning environments. They are the polar opposite of lectures. Here the quality of experience I’ve had has been sub-par. For me, video conferencing cannot replicate the experience of being in a room together debating an interesting topic. Technical hurdles remain: slow connections; delayed sounded; distorted video, etc. What’s more the technology affords people the opportunity to coast, or, for those lacking in confidence, the ability to just hide behind their avatar with the mic off.

New social norms will establish themselves. For example, I can foresee many universities mandating video be turned on with an optional background to protect a student’s privacy. Similarly, technology should make the audio visual experience better. But this will take time, and it’s likely be a case of good enough rather than as good or better. Personally, I am skeptical that we will ever create a learning environment as effective as a group of people sitting around together exchanging ideas.

Social life

I am not best placed to judge the quality of social opportunities while taking part in my master’s programme. While meeting new people is always nice, as a 36 year old with a young family it was much lower on my list of priorities. Judging by the comments from others on my course, and from the union emails I received, there was a valiant but ultimately failed attempt to create opportunities for students to meet.

The extent to which technology can fill this void will come down to one’s expectation. For those on my course looking for the “traditional” university experience I think the tools available today are laughable substitutes. However, for someone who has signed up for a distance learning experience, an online club centred around an interest may prove quite enjoyable.

“Distance Learning”

Considering the social aspect of university brings me the next topic quite nicely. Covid has blurred the boundary between distance and on-site learning. Take King’s by way of example. King’s advertises 11 online master’s course on their website and yet, right now, many of 256 taught on-site master’s programmes they offer are being facilitated online to some extent. Those that don’t require lab access (such as mine) are likely to be fully online.

There is a good chance I wouldn’t have enrolled in a master’s if I’d have been required to attend everything in person. I simply wouldn’t have had the time for the on-site programmes, and the range of distance learning courses to choose from is dramatically smaller.

It feels inevitable to me that universities will begin offering a wider range of programmes to distance learners. The past 18 months has proven that they can do it, so as long as British universities continue to over index relative to their size in global rankings, the financial motivation to do so will be there as well. 1

I can envisage a hybrid offering where all students access the same lecture content, i.e. pre-recorded with a student/teaching forum for Q&A. On-site learners get access to the campus facilities and attend seminars in person, while distance learners all attend video conferencing seminars and have different, if not zero, campus access rights.

Cost

One of the consistent gripes amongst my course mates is that we are paying the same prices for our course as someone who attended back in 2018/19. They got the full King’s experience, we are getting something far from that. I am happy to accept that this will regarded as a quirk of history, but, should universities adopt a hybrid model similar to the one I’ve outlined above some reduction in cost will need to follow.

Over supply…

All universities are elitist to some extent. They deliberately balance (although I am guessing it is more art than science) the supply of degrees in order to retain their status and the additional income that it generates. If technology enables massive lecture participation. If seminars no longer require physical space to attend. If reading has been digitised. Widening participation by increasing the number of distance learning programmes quickly follows. In other words, you can detach King’s the brand from King’s the physical space.

Maybe this is something universities could have always done. Maybe they have long hidden behind their physical campuses as a way of keeping people out. But now you’ve proven that some form of heightened accessibility is possible, the tough question to answer is: why would you be happy to return to the way things were?


1. The Institute of Fiscal Studies estimates that British universities are facing an of an income gap of £11B. £2.8B of that is attributed to a fall in international student enrolment brought on by the pandemic. A cursory look at a range of international university ranking systems shows British institutions are well placed.


Subscribing to Platformer and joining Sidechannel

I subscribed to Casey Newton’s Platformer last week. It was the first time I have paid for a so called “sovereign writer” since the trend took off last year. There were some fairly obvious motivations for this. First, the quality of Newton’s writing. He’s been covering the sector for quite some time now and that experience comes through. He’s probably a bit more tolerant of platform harms than I am, however, he’s not the acolyte that some would paint him as. He sees the problems they cause, but won’t be drawn into knee jerk reactions either. This later point also means that his access to the leaders in the industry is as good as it gets. They know he won’t fire “gotcha” style questions at them, and, whether it’s right or not, Zuckerberg et al. are under no obligation to talk to anyone. Just ask Parliament.

It was the launch of Sidechannel — a Discord community for paid subscribers — that pushed me into parting with my money, however.

For a long time now I’ve wanted an outlet for my interest in platforms and the impact digitisation has had on the wider economy. Reading about it myself could only take me so far. And while enrolling in a master’s at King’s has been an incredible experience, it will soon come to an end and I’ll lose the opportunity to share papers and debate with people who are interested in the same topic.

Sidechannel may not be quite as intense as the rhythm of research and seminar debates, but it’s in the same ball park. Everyone who is part of the Discord server is paying to be there, so the motivation to get value from it is real. Similarly, the total number of subscribers is in the thousands, not the tens or hundreds of thousands, so there is opportunity for meaningful discourse. What’s more the community an interesting mix of engineers, policy wonks, legal experts, designers and people who are just motivated to learn more about the platformification(?) of life. Conversation often centres around Newton’s writing, but it’s more than a comments thread as subscribers can start discussions too. And, of course, there are the live interviews.

I have been tempted to blog about the sovereign writers / indie journalists thing for a while. I think focussing the debate on Silicon Valley’s desire to undermine the institutions of journalism (however accurate that may be) fails to recognise some of the benefits the trend will bring to the wider journalism ecosystem.

I shall save that for another post, but in the mean time, I will leave you with the thought that the creation of niche audiences, anchored on the rigour of a lead journalist, adds something positive to the media landscape that didn’t exist before. If more journalists of note follow in Sidechannel’s footsteps I’m sure it will bring other readers to the table.