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Audience as Capital Data Custody Discovery and Curation Making Money Online The Dark Forest of the Internet Wellness when Always-On Writing

For content platforms, revenue and moderation are inextricably interlinked

The newsletter platform Substack, on its revenue model:

A lot of people suppose that we started Substack to be the next big thing in journalism. But what we’re actually trying to do is subvert the power of the attention economy.

When engagement is the holy metric, trustworthiness doesn’t matter. What matters more than anything else is whether or not the user is stirred. The content and behaviors that keep people coming back – the rage-clicks, the hate-reads, the pile-ons, the conspiracy theories – help sustain giant businesses. When we started Substack to build an alternative to this status quo, we realized that a tweak to an algorithm or a new regulation wouldn’t change things for the better. The only option was to change the entire business model.

Substack’s key metric is not engagement. Our key metric is writer revenue. We make money only when Substack writers make money, by taking a 10% cut of the revenue they make from subscriptions. With subscriptions, writers must seek and reward the ongoing trust of readers.

Substack does two things differently from typical social platforms: one, by encouraging paid publications, readers pay to receive their information fix, which naturally caps the number of newsletters a person receives and by extensions the attention they capture. Two, it has aligned its revenues with these paid publications. These two by themselves are a significant departure from the norm, for the better.

There is always the likelihood, perhaps the inevitability that deliberately divisive, disingenuous polemical publications will publish on Substack for free, making money off sponsorships instead of reader payments, and they may amass large followings too. And Substack too has declared that they will be light with censorship:

we commit to keeping Substack wide open as a platform, accepting of views from across the political spectrum. We will resist public pressure to suppress voices that loud objectors deem unacceptable.

This will be something that Substack will have to reckon with, and perhaps soon. Yes, apublication with a generous enough sponsor – whether public or not – and a large enough audience is better off simply hosting their own newsletter infrastructure, which is not complicated. But they may also simply continue on Substack. What is the company to do then?

The possible answers are for another time. In any case, Substack’s approach to revenue and moderation, its recognition that they are interlinked, and its willingness to publicly articulate it, is commendable.

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Audience as Capital Discovery and Curation Making Money Online Writing

Content may be free but publishers of content can nevertheless be powerful

In a powerful essay that explains the moats that people who publish can create around their work, the reasons behind audience loyalty. This applies to whether the work is writing, video, podcasts or other mediums. I’ve summarised my understanding of the seven points the writer makes:

  1. Scale works differently: Writing has larger fixed costs and relatively low marginal costs, unlike tech businesses of late, which are built around low to zero fixed costs. As a result, investment in quality pays off more than in quantity.
  2. Network effects apply both to content creators as well as to content platforms like social networks, but apply differently. A publisher’s followers build a shared understanding of a small part of the world. At its best, it builds its own subculture.
  3. Publishers with strong points of view that run counter to established narratives are hard for existing players to compete with. Resisting it will fail to retain those who are inherently swayed by it; co-opting it risks alienating incumbents’ very audience
  4. Following naturally from points two and three, once a group of people with a shared interest, opinion and understanding has formed around a person’s published work, it’s hard for them to replicate it elsewhere. In tech terminology, the switching costs are high
  5. The publisher builds a brand that’s clearly identified with what their message is, and that makes it easy for people who’re looking for authority and quality to find them, because the internet’s discovery mechanisms optimise for exactly this.
  6. The publisher’s talent is a scarce resource – as we’ve seen in point one, it’s not easy to build to begin with, and in points two and four, that once built it’s not easy to replicate. And across industries, scarce and desirable resources are valuable.
  7. A final moat is a publisher’s craft, described by the writer as their processes. It’s built up over time and can neither be replicated quickly nor substituted by cash.

There’s significant overlap between them, but then it’s a grab-bag of points, not a framework. Nevertheless, it’s great starting material to understanding your power as a publisher (or ‘content creator’) and creating your own positioning.

Categories
Audience as Capital Discovery and Curation Personal Finance Products and Design Wellness when Always-On

Herd mentality

I read recently about the USA investing app Robinhood being charged with “gamifying” investing and not putting in place “proper controls to safeguard inexperienced investors.” I was curious about what gamification techniques the service actually uses. Here’s what I found:

“Robinhood’s Role in the ‘Gamification’ of Investing: QuickTake”, Bloomberg, Dec 2020

Investors are congratulated for their first trade with a confetti animation. They’re offered a (tiny) chance of snagging a share of a high-price glamour stock such as Apple Inc. if they get a friend to sign up. They can browse the 100 most-held stocks among fellow users for inspiration. An entertainment ecosystem has risen up alongside Robinhood; TikTok videos under #robinhoodstocks have millions of views.

“Robinhood’s Addictive App Made Trading a Pandemic Pastime”, Bloomberg, Oct 2020

Robinhood’s app emphasizes social interaction by using the possibility of getting a free share of stock in exchange for inviting friends to sign up. You have a tiny chance of snagging a high-price glamour stock such as Apple Inc., Robinhood says, if your friend signs up and links a bank account. If you find your well of investment ideas running dry—or perhaps don’t know where to start—you can browse the 100 most-held stocks among fellow Robinhood users for inspiration.]

Robinhood and the Gamification of the Stock Market, McGill Business Review, Jul 2020

Through a Candy Crush-esque UX design with additions like confetti showers to celebrate transactions, the app gamifies the stock market, sending millions of bored-in-the-house millennials into a trading frenzy through a seemingly playful environment with dangerously real consequences.

Robinhood Has Gamified Online Trading Into an Addiction, Scott Galloway, Jun 2020

Confetti falls to celebrate transactions.
Colorful Candy Crush interface.
Users can tap up to 1,000x per day to improve their position on the waitlist for Robinhood’s cash management feature (essentially a high-yield checking account on the app).

Designed to distract: Stock app Robinhood nudges users to take risks, NBC News, Sep 2019

When smartphone owners pull up Robinhood’s investment app, they’re greeted with a variety of dazzling touches: bursts of confetti to celebrate transactions, the price of bitcoin in neon pink and a list of popular stocks to trade.

A critique of Robinhood’s gamified interface, Georgetown Collegiate Investors, Aug 2020

For starters, the flashing green and red lights, as well as the confetti, often lead users to act on their emotions instead of keeping a calm and level head. The green lights and confetti serve as subtle but prevalent psychological rewards for users. Likewise, the red numbers on the screen invoke feelings of anxiety and fear that may drive users to make irrational choices.

It’s surprising how over the course of a whole year and more, all the articles criticising Robinhood about its gamified interface don’t go beyond the confetti and a detail-less reference to Candy Crush-like design.

Further, nearly every post I’ve read on this topic follows a familiar narrative: that Robinhood encourages poor investing decisions because it doesn’t charge commissions, that it turns investing into a game, that it is disingenuous about how it makes money (payment for order flow to high-speed trading firms), that a customer once took his life after misinterpreting a large negative balance, quotes from ‘industry experts’ about Robinhood being the vanguard of a disturbing trend towards casual DIY investing. It’s astonishing how similar these articles are.

Ironically, the only post with any more detail and actual screenshots is this one, which praises Robinhood interface:

Robinhood is gamified from the start. They reward users that have just signed up with one free share of a stock, chosen by chance. The app doesn’t simply present the free stock to the user from the beginning. The process is similar to something you’d see at a casino. Users are presented with three blank cards, and are prompted to choose one. When chosen, the card flips and the free stock is revealed, with confetti and all…
The black background and bright primary accent colors are reminiscent of a Pacman game. Red is used when a stock has moved down, and green when a stock is up, creating a sense that the user is winning or losing

Obviously, this isn’t about what I think of Robinhood the service. It’s that the onus of understanding an issue in depth seems to be on the reader. And it doesn’t seem to be practical – the only reason I read over a dozen articles on the specific topic of Robinhood’s gamification of stock investing was because that was what I was curious about. The average reader’s just going to read one of these and form an opinion, unaware that all the other coverage of this issue is identical and narrow.

Ultimately this means that we, as individuals, need to choose carefully what topics we are interested in, since, as we’ve seen, the quality of online coverage leaves the duty of diligence to us. And finally, curators will almost certainly become even more important, moving beyond their role as tastemakers and influencers to shapers of world-views.

[Addition 5 Jan 2021] The clearest description of Robinhood’s techniques to drive impulse-based purchases is from a Twitter thread. If you are at all curious about what Robinhood’s gamification means, read through this:

https://twitter.com/petershk/status/1344286419380916228?s=20

(Featured Image Photo Credit: Austin Distel/Unsplash)

Categories
Audience as Capital Data Custody Privacy and Anonymity Products and Design

Monopolies that may not matter

I came across this blog post that cites Peter Thiel’s thesis of monopoly power in his book Zero to One as one of the root causes of the dominance of Big Tech:

Thiel made the case for monopoly as the ultimate goal of capitalism. Indeed, “monopoly is the condition of every successful business,” he asserted. With it, you’re free to set your own prices, think long-term, innovate, and pursue goals other than mere survival. Without it, you’re replaceable, and your profits will eventually converge on zero.

… it’s not hard to imagine how Thiel’s outlook [on monopoly] has helped to justify behavior by tech titans that routinely crosses the line from aggressive to anticompetitive, including Facebook’s policy of cutting off access to its platform from any company it deems a direct competitor. Like Gordon Gekko in Wall Street proclaiming that “greed … is good,” Thiel’s full-throated defense of monopoly gave tech leaders such as Zuckerberg philosophical cover to ruthlessly pursue their own self-interest while patting themselves on the back for it.

I think the writer misses an important point: the definition of a market that a business looks to monopolise. With sharp positioning, brands divide a market into a number of micro-markets that they look to dominate. See this good explanation of what great positioning looks like:

Harley-Davidson publicly shared their positioning statement:
The only motorcycle manufacturer
That makes big, loud motorcycles
For macho guys (and “macho wannabes”)
Mostly in the United States
Who want to join a gang of cowboys
In an era of decreasing personal freedom.

In tech, the barriers to entry in most spaces have trended downwards. Funding has, in general, been plentiful, including during a year as unusual as 2020. Every creator wants to be monopolist for their increasingly narrowly defined market.

Facebook, the target of an antitrust case as of this writing, understands this well. Facebook leadership understands that people tomorrow may look to something completely different to stay ‘open and connected’. It could be visual – hence their acquisition of Instagram. It could be text-oriented, group and chat based – see Whatsapp. Could be VR – Oculus. Could be audio or even video, hence their description of Tiktok as an existential thread and their building of stories into every product, including Whatsapp statuses. But it could also be something that looks like Slack or Discord. It could be something built on top of boring old email, unrecognisable from today’s traditional email clients. But more than anything it could be all of them. It could be – and is likely to be – multiple startups of each such type optimised for different narrow audiences.

Everyone may still have a Facebook account, they may still be tracked all over the web, and it wouldn’t matter because they’re no longer logging into Facebook that often to be served ads.

To come full circle on the issue of monopolies – one could imagine a future in which Facebook could technically be a monopoly: they could be the number one social network by far. Their MAUs could be in the billions. But their Big Tent positioning would also be irrelevant in a world where tens of thousands of brands have successfully created microniches such that not a single one of them holds a candle to Facebook’s numbers but taken together they have taken away all of the attention that Facebook used to capture.

Categories
Products and Design The Next Computer

Commitment to principles

I wish that I could buy hardware as well made as Apple’s from anyone else, for any amount of money. To be clear, I don’t mean “brushed aluminum” or “sub-micron tolerances” or “retina screens are made of love”, though those are all nice enough; I mean “committed.” To a set of values, of principles, an aesthetic. To something. Apple’s hardware is extraordinarily well-executed design-in-depth in service of a set of principles I fundamentally disagree with and a vision I don’t share. But I don’t know of anyone else making hardware who is that committed to level of execution, to understanding their own values and expressing them through the design and function of their products. I don’t care about “thin” or “light” at all, but far as I can tell I can’t buy hardware built with a comparable commitment to resilience, maintainability or experimentation from anyone, anywhere. 

– Mike Hoye, The Setup, 2019
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Real-World Crypto

What is the price of bitcoin? Maybe we don’t have to have an answer

I find this WSJ article on bitcoin data very interesting:

The discrepancies in the bitcoin data reflect the nature of the industry itself. Bitcoin and hundreds of other cryptocurrencies trade on independent exchanges around the world. Every exchange manages its own data feed, comprising millions of trades. Some are regulated and transparent; others are notorious for unreliable volume numbers and fraudulent trading.

In traditional capital markets, exchanges like the New York Stock Exchange andNasdaq Stock Market provide troves of data that help investors value the underlying assets in mutual, index and exchange-traded funds. That doesn’t exist in the crypto market.

What mainly exists currently, he said, are market-data feeds that average prices across a number of exchanges. That makes it difficult to come up with an acceptable definition of fair-market value.

– What Is Bitcoin Worth? There Is Little Consensus in Fragmented Market

If paying with bitcoin had really caught on, transactions themselves would be denominated in bitcoin, goods would be priced in bitcoin, and one bitcoin would be worth, well, one bitcoin. But payments never caught on, and this decade has ended with bitcoin gaining popularity as a security, albeit a purely speculative one.

Now traditional securities, are made traceable by listing them on exchanges, where price discovery happens centrally. Peloton stock is listed on the NASDAQ, which knows what the matching buy and sell prices are at any time, which is the current price of the stock.

But bitcoin is not a traditional security – not only was it not designed to ever be a security, but it’s decentralised. There’s no Bitcoin Co that lists Bitcoin on a chosen exchange. Literally anyone can buy and sell bitcoin without any intermediary. A bitcoin exchange at its core is merely someone putting up a booth on the internet announcing that buyers and sellers can meet here to find each other more easily. Any number of people can put up any number of booths that do the same thing, no permission needed. The “independent exchanges” that the writer refers to is tautological – all crypto exchanges are independent.

I think the presence of multiple exchanges and the difference in prices on each one of them is a good thing, and attempting to legislate a standard price for bitcoin, for instance by forcing some centralisation, would be a tragedy. Bitcoin as a speculative asset and the exchanges that it trades on is a great free market experiment. There will be exchanges that optimise for different things – including swindling customers out of their money. But there will be others that relentlessly optimise for low price. Still others for transparency. Yet more for access. There will be multiple winners, not all necessarily competing with each other, each reporting different prices for bitcoin. That price will be reflective of their audience: exchanges in India have higher prices for bitcoin. That’s just the premium that Indians are willing to pay for access to bitcoin – prices across exchanges in India are quite close to each other. You could have a hypothetical exchange in, say, Germany that became known for manipulating buy and sell pools. As long as it offered something else – say, an exceptionally large humber of trading pairs – customers may well still trade on it. That price will be determined by the buyers’ balancing of apprehensions about manipulation on the one hand and the availability of trading pairs on the other. There is no parallel to this in highly regulated, centralised capital markets.

A single, indubitable price – until now a core tenet of any reliable security – may well be something we leave behind in the case of bitcoin.

Categories
Life Design Wellness when Always-On

The confidence of no

I’m becoming more conscious about my attention on a day-to-day basis. Several times during the day I myself evaluating whether what I am engaged in at that moment is worth my attention.

It’s often most relevant to when I find myself skimming through quote-unquote content, or watching TV on the iPad, but also when I’m having phone or chat conversations at or outside of work: have we reached diminishing returns on this conversation? Is this important enough to hold my attention? There’s an awareness of the temptation of multi-tasking.

Contrastingly, when I find myself thinking through or dwelling on an idea, I ask whether I should continue to indulge it or make a note and get on with my day.

Today I came across this article titled “How to find focus“. The writer says that they have found focus by saying “no to obligations or opportunities that I would have easily accepted before”, but it’s what follows that’s more interesting:

The most significant change in my thinking has been that I have a lot of conviction now that the few things I’m spending my time on – university, writing, side projects – are right for me.

Bingo. It’s hard to answer the questions above if you don’t have some level of confidence in what’s important to you and what isn’t. In the absence of conviction, you’ll yo-yo between giving in to stimulus temptation – of which there’s no shortage in our information-suffused lives – or forcing yourself to focus on stuff that someone else wants you to: a friend, your manager.

But if you have a good enough awareness of what is worth your attention, then combined with awareness, you’ll have a much easier time deciding what to say yes or no to – that calendar invite, that new personal project, that new Twitter subscription or Netflix recommendation, that conversation segue.

Categories
Life Design

Removing negatives

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[the question I ask myself before a purchase is] Is this removing a negative in my life? Because it’s pretty well studied that happiness is not very much affected by adding positives to your life, it’s mostly… especially in a rich world/environment like we live… mostly accomplished by removing things that are a strong negative to everyday.

– Peter Adeney aka Mr. Money Mustache on the Tim Ferriss blog, in 2017
Categories
Life Design The Next Computer Wellness when Always-On

Screening relationships

via Shweta.

Maintaining an extended simulacrum of reality is hard when mediated through today’s state of the art video-conferencing technology:

Even some people whose values still align with those of their friends have found their relationships suffering during the pandemic.

The reason for their drift is not rooted in ideological differences, but rather distance.

While video calls over Zoom or Facetime have helped, many have said that after spending most of the year staring at a screen, they’ve had enough.

– The pandemic has destroyed friendships and divided families

Amidst the talk of work forever being altered by the pandemic and of the dawn of the remote work age, it’s worth acknowledging that the relationships built in the real world are going to be tough to maintain through screens and phone calls. That the relationships formed in the remote world are likely to be different – not necessarily better or worse, but different – from those in the real world.

Categories
Data Custody Decentralisation and Neutrality Writing

Own your content, December reminder

and

Within 24 hours. The case for owning your own content gets stronger by the week.

Previously:

July 2020: Platform censorship and the Malpani incident

November 2020: A problem with Amazon Web Services caused several appliances to go offline