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Posts Tagged ‘social media

“Create more value than you capture”*…

As Donald Trump’s presidency careened to its ignominious end, with a mob of his supporters storming of the US Capitol, Facebook and Twitter banned the US president for inciting the violence. With that act, the scope of the political power wielded by Big Tech became impossible to ignore.

Whether these platforms have too much political power is a debate that is just beginning. Their outsize economic power, though, is unquestionable. The combined market capitalization of the five largest US tech platforms – Alphabet (Google), Amazon, Apple, Facebook, and Microsoft – rose by $2.7 trillion in 2020. Following the addition of Tesla to the S&P 500, the Big Six tech firms now represent nearly one-quarter of the index’s valuation. And with the spread of COVID-19, the leading digital platforms have become de facto essential service providers, enabling a mass transition to remote and isolated living.

And yet the political pressure on Big Tech has continued to rise. There is a growing consensus that platforms have been abusing their power, driving profits by exploiting consumer privacy, crushing the competition, and buying up potential rivals.

The economics of platforms is different from the economics of traditional offline and one-sided markets. Policymakers therefore need to reconsider some of their most basic assumptions, asking themselves whether they are even focusing on the right things.

A key challenge is to determine how the value of data diverges from the value created by providing a data-generating service. Platforms have the power to shape how decisions are made, which in turn can alter the value of the data being amassed. The implication, as Google co-founders Larry Page and Sergey Brin foresaw in a 1998 paper, is that advertisers or any other third-party interest can embed mixed motives into the design of a digital service. In the case of internet search, the advertising imperative can distract from efforts to improve the core service, because the focus is on the value generated for advertisers rather than for users.

As this example shows, it is necessary to ask who benefits the most from the design of a given service. If a platform’s core mission is to maximize profits from advertising, that fact will shape how it pursues innovation, engages with the public, and designs its products and services.

Moreover, it is important to understand that even if antitrust authorities were empowered to break up companies like Google and Facebook, that would not eliminate the data extraction and monetization that lie at the heart of their business models. Creating competition among a bunch of mini-Facebooks would not weed out such practices, and may even entrench them further as companies race to the bottom to extract the most value for their paying customers…

Digital markets do not have to be extractive and exploitative. They could be quite different, but only if we ourselves start to think differently. We need to recognize, as Adam Smith did, that there is a difference between profits and rents – between the wealth generated by creating value and wealth that is amassed through extraction. The first is a reward for taking risks that improve the productive capacity of an economy; the second comes from seizing an undue share of the reward without providing comparable improvements to the economy’s productive capacity.

For the past half-century, corporate governance has rested on the notion of shareholder value. The result is an economy in which it is increasingly important to differentiate firms that are actually driving innovation from those that are not. There is no shortage of firms that are engaged merely in financial engineering, share buy-backs, and rent-seeking, extracting gains from actual risk takers while under-investing in the goods and services that generate value.

The digital economy has accelerated this conflation of wealth creation and rent extraction, making it all the more difficult to differentiate between the two. The issue is not just that financial intermediaries are shaping how value is created and distributed across firms, but that these extractive mechanisms are embedded within user interfaces; they are baked into digital markets by design…

The proliferation of such practices shows why we need to focus more on the “how” of wealth creation, and less on the “bottom line.” An economy that produces wealth from privacy-respecting innovations would not function anything like one that encourages the systematic exploitation of private data.

But building a new economic foundation will require a shift from the shareholder model to a stakeholder model that embodies a deeper appreciation of public value creation. Wealth and other desirable market outcomes are collectively co-created among public, private, and civic domains, and should be understood as such. Policy analysis and corporate decision-making can no longer be guided solely by concerns about maximizing efficiency. We now also must consider whether wealth generation is actually improving society and strengthening the ability to respond to social challenges.

After all, the fact that platforms are creating wealth does not mean they are creating public value. A firm with access to massive amounts of data and network effects could, in theory, use its position to improve social well-being. But it is unlikely to do so if it is operating under a framework that prizes the generation of advertising revenue over everything else, including the performance of products and services…

Today’s digital economy has grown up around a business model of data and wealth extraction, confounding traditional antitrust paradigms and undermining the public and social value that otherwise could be derived from technological innovation. An acute diagnosis of a fundamental structural challenge, and thoughts on steps to address it– Mariana Mazzucato (@MazzucatoM), Tim O’Reilly (@timoreilly), and colleagues: “Reimagining the Platform Economy.” Do click through to read piece read the entire piece.

* Tim O’Reilly


As we dig deep, we might recall that it was on this date in 2005 that YouTube was founded and registered (though it didn’t launch until November of that year). The creation of three PayPal vets (Chad HurleySteve Chen, and Jawed Karim), it was bought by Google one year after launch (in November 2006) for $1.65 billion. Operating as one of Google’s subsidiaries, it is now (per Alexa Internet Rankings) the second most trafficked web site, after its parent’s search page.

YouTube logos over time


Written by LW

February 14, 2021 at 1:01 am

“What is written without effort is in general read without pleasure”*…

When a man is tired of memes, he is tired of life.

Samuel Johnson’s original observation pertained to his hometown of London, the streets of which he knew better than most. As a man of letters and author of a best-selling dictionary, he wrote volumes [see here]. But nowadays, in the words of one English professor, “Samuel Johnson is one of those figures whom everyone quotes and no one reads.” (The use of “whom” is how you know an English professor wrote that.)

That’s perhaps as it should be: As the subject of the first modern biography [see here], Johnson (1709-84) was known as the best social talker who ever lived. And 228 years after his death, referencing Johnson’s portrait by Sir Joshua Reynolds became a universally recognized expression of this profane sentiment: 

Resurrecting history’s most quotable man: “The memeification of Dr. Johnson

For more on the remarkable Dr. J., see “A Word A Day, the Doctor’s Way.”

* Samuel Johnson


As we share the love with Shakespeare, we might recall that it was on this date in 2000 that Charles M. Schulz published the last daily Peanuts strip. (The final Sunday panel ran on on February 13 of that year.)


Written by LW

January 3, 2021 at 1:01 am

“One of the things I did not understand, was that these systems can be used to manipulate public opinion in ways that are quite inconsistent with what we think of as democracy”*…



Nineteen years ago, in his third annual call for answers to an Annual Question, John Brockman asked members of the Edge community what they believed to be “today’s [2000’s] most important unreported story.” The remarkable Howard Rheingold (@hrheingold) answered in a way that has turned out to be painfully prophetic…

The way we learn to use the Internet in the next few years (or fail to learn) will influence the way our grandchildren govern themselves. Yet only a tiny fraction of the news stories about the impact of the Net focus attention on the ways many to-many communication technology might be changing democracy — and those few stories that are published center on how traditional political parties are using the Web, not on how grassroots movements might be finding a voice…

Every communication technology alters governance and political processes. Candidates and issues are packaged and sold on television by the very same professionals who package and sell other commodities. In the age of mass media, the amount of money a candidate can spend on television advertising is the single most important influence on the electoral success. Now that the Internet has transformed every desktop into a printing press, broadcasting station, and place of assembly, will enough people learn to make use of this potential? Or will our lack of news, information, and understanding of the Net as a political tool prove insufficient against the centralization of capital, power, and knowledge that modern media also make possible?…

The political power afforded to citizens by the Web is not a technology issue. Technology makes a great democratization of publishing, journalism, public discourse possible, but does not determine whether or not that potential will be realized. Every computer connected to the Net can publish a manifesto, broadcast audio and video eyewitness reports of events in real time, host a virtual community where people argue about those manifestos and broadcasts. Will only the cranks, the enthusiasts, the fringe groups take advantage of this communication platform? Or will many-to-many communication skills become a broader literacy, the way knowing and arguing about the issues of the day in print was the literacy necessary for the American revolution?…

The Scylla and Charybdis of which Howard warned– centralization-by-capital/political power and atomization-into-cacophony (whether via the pollution of manipulation/”fake news” or simple tribalism)– is now all too apparent… even if it’s not at all clear how we sail safely between them.  It’s almost 20 years later– but not too late to heed Howard’s call, which you can read in full at “How Will The Internet Influence Democracy?

* Eric Schmidt, Executive Chairman of Google [as Howard’s 2000 insight dawns on him in 2017, source]


As we try harder, we might recall that it was on this date in 1911 that financier and “Father of Trusts” Charles R. Flint incorporated The Computing-Tabulating-Recording Company as a holding company into which he rolled up manufacturers of record-keeping and measuring systems: Bundy Manufacturing Company, International Time Recording Company, The Tabulating Machine Company, and the Computing Scale Company of America.

Four years later Flint hired Thomas J. Watson, Sr. to run the company; nine years after that, in 1924, Watson organized the formerly disparate units into a single operating company, which he named “International Business Machines,” or as we now know it, IBM.

150px-CTR_Company_Logo source



“Status is welcome, agreeable, pleasant, and hard to obtain in the world”*…




“It is a truth universally acknowledged, that a person in possession of little fortune, must be in want of more social capital.”

So wrote Jane Austen, or she would have, I think, if she were chronicling our current age (instead we have Taylor Lorenz, and thank goodness for that).

Let’s begin with two principles:

  • People are status-seeking monkeys*
  • People seek out the most efficient path to maximizing social capital

I begin with these two observations of human nature because few would dispute them, yet I seldom see social networks, some of the largest and fastest-growing companies in the history of the world, analyzed on the dimension of status or social capital.

It’s in part a measurement issue. Numbers lend an air of legitimacy and credibility. We have longstanding ways to denominate and measure financial capital and its flows. Entire websites, sections of newspapers, and a ton of institutions report with precision on the prices and movements of money.

We have no such methods for measuring the values and movement of social capital, at least not with anywhere near the accuracy or precision. The body of research feels both broad and yet meager. If we had better measures besides user counts, this piece and many others would be full of charts and graphs that added a sense of intellectual heft to the analysis. There would be some annual presentation called the State of Social akin to Meeker’s Internet Trends Report, or perhaps it would be a fifty page sub-section of her annual report.

Despite this, most of the social media networks we study generate much more social capital than actual financial capital, especially in their early stages; almost all such companies have internalized one of the popular truisms of Silicon Valley, that in the early days, companies should postpone revenue generation in favor of rapid network scaling. Social capital has much to say about why social networks lose heat, stall out, and sometimes disappear altogether. And, while we may not be able to quantify social capital, as highly attuned social creatures, we can feel it.

Social capital is, in many ways, a leading indicator of financial capital, and so its nature bears greater scrutiny. Not only is it good investment or business practice, but analyzing social capital dynamics can help to explain all sorts of online behavior that would otherwise seem irrational.

In the past few years, much progress has been made analyzing Software as a Service (SaaS) businesses. Not as much has been made on social networks. Analysis of social networks still strikes me as being like economic growth theory long before Paul Romer’s paper on endogenous technological change. However, we can start to demystify social networks if we also think of them as SaaS businesses, but instead of software, they provide status. This post is a deep dive into what I refer to as Status as a Service (StaaS) businesses…

Eugene Wei (of Amazon, Hulu, and Flipboard, among other tech successes) on the implications of our hunger for recognition and rank: “Status as a Service (StaaS).”

Pair with: “Understanding Tradeoffs (pt. 2): Breaking the Altruism vs. Capitalism Dichotomy.”

[Image above: source]

* Buddha [Ittha Sutta, AN 5.43]


As we contemplate our craving, we might recall that it was on this date in 1845 that a method for manufacturing elastic (rubber) bands was patented in Britain by Stephen Perry and and Thomas Barnabas Daft of London (G.B. No. 13880/1845).

In the early 19th century, sailors had brought home items made by Central and South American natives from the sap of rubber trees, including footwear, garments and bottles.  Around 1820, a Londoner named Thomas Hancock sliced up one of the bottles to create garters and waistbands. By 1843, he had secured patent rights from Charles Macintosh for vulcanized India rubber.  (Vulcanization made rubber stable and retain its elasticity.)  Stephen Perry, owner of Messrs Perry and Co,. patented the use of India rubber for use as springs in bands, belts, etc., and (with Daft) also the manufacture of elastic bands by slicing suitable sizes of vulcanized India rubber tube.  The bands were lightly scented to mask the smell of the treated rubber.



Written by LW

March 17, 2019 at 1:01 am

“Unless it wants to break faith with its social function, art must show the world as changeable. And help to change it.”*…


Andrei Lacatusu, a self-taught digital artist from Rome, created this series of digital art called “Social Decay.”

Learn more at “Artist Imagines The Decay Of Social Media Companies“; see the full set at Lacatusu’s Behance page.

[TotH to the always-illuminating Pop Loser]

* Ernst Fischer


As we contemplate a post-social media world, we might recall that it was on this date in 1996 that the first version of the Java programming language was released by Sun Microsystems; the language, created by James Gosling, had been in use in since 1995 as part of Sun’s Java Platform.  Its ability to “write once, run anywhere” made Java ideal for Internet-based applications.  As the popularity of the Internet soared, so did the usage of Java.



Written by LW

January 23, 2018 at 1:01 am

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