Marc Andreessen and Jim Barksdale on How to Make Money

I’ve been thinking about this a lot lately. Distribution is so often not considered when thinking about product design, when often it’s the primary advantage of an organisation. But the idea that the dominant distribution model also sets the product design is also essential to understanding disruption.

So the newspaper bundle– of the idea of this kind of slug of news, and sports scores, and classifieds, and stock quotes that arrive once a day– was a consequence of the printing plant, of the distribution network for newspapers, using trucks, and newsstands, and newspaper vending machines, and so forth. But that newpsaper bundle was based on the distribution technology of a time and place.

And when the distribution technology changed, with the internet, there was going to be kind of the great unwind. And then the great, you know, re-bundle– in the form of Google, and Facebook, and Twitter, and all these new bundles.

I think your music example is a great example of that. Which is, it made sense in the LP and CD era, to put 8, or 10, or 12, or 15 songs on a disc, and press the disc, and ship it out, and have it sit in stores until somebody came along and bought it. It didn’t really make sense to unbundle, given that technology. But when you have the ability, online, to download or stream individual tracks, then all of a sudden, that bundle just doesn’t make sense. And so it makes sense that it collapsed apart into individual mp3s.

Source: Marc Andreessen and Jim Barksdale on How to Make Money

Sandberg and Dorsey in Congress, Dorsey and Incentives, Google’s Absence

Straight-up posting one full article temporarily: https://stratechery.com/2018/sandberg-and-dorsey-in-congress-dorsey-and-incentives-googles-absence/


 

Good morning,

OK, that I need a correction to a correction about holiday well-wishes is getting a bit ridiculous, but as numerous Canadian readers told me yesterday, Monday was not “Labor” Day, but “Labour” Day. Of course why Canada prefers old English over the new perfected version appropriate for the new world is more a matter for history than technology. 😁

In addition, last spring I recorded a podcast with Shane Parrish at Farnam Street. It took a little while but the episode has now been posted, and I think you’ll enjoy it.

On to the update:

Sandberg and Dorsey in Congress
From the Washington Post:

Facebook’s Sheryl Sandberg and Twitter’s Jack Dorsey told lawmakers on Wednesday that they are better prepared to combat foreign interference on their platforms, even as Democrats and Republicans alike expressed doubts that the social media giants had fully cleaned them up ahead of the midterm elections.

Sandberg, the chief operating officer of Facebook, and Dorsey, the leader of Twitter, conveyed their message in front of the Senate Intelligence Committee, almost a year after their companies told the same panel of lawmakers that Russia used inauthentic accounts to spread divisive political messages around the 2016 election. This time, though, lawmakers on the committee came equipped with a roster of fresh complaints — from the proliferation of fake video online to the heightened need to protect privacy and combat hacking.

As they testified, though, some of their most public adversaries sat behind them, including conservative media personalities like Alex Jones, the founder of the conspiracy-minded InfoWars. The presence of Jones, who had been banned from both platforms for violating rules against harassment, seemed all the more striking given a Wednesday afternoon hearing in the House, featuring Dorsey, focused on allegations that tech is biased against right-leaning users.

I’m going to focus today on the Senate Intelligence Committee hearing, which was a fair bit more substantive than many hearings to-date have been (I have covered previous hearings about the 2016 election here, here, here, and here). In particular, there was hardly any grandstanding on the part of the Senators, there was only one misguided question about Facebook selling data, and really not much filibustering from Sandberg and Dorsey.

The biggest change, it seems to me, is that the Senators on the committee have started to come to grips with just how significant of a challenge it is that these platforms face. Committee Chairman Richard Burr stated in his opening remarks:

We’ve learned more about social media over the last 18 months than I suspect most of us ever thought we would in a lifetime. We’ve learned about social media’s boundless potential for good, and its ability to enable thoughtful and engaged interactions on a global scale; but we’ve also learned about how vulnerable social media is to corruption and misuse. The very worst examples of this are absolutely chilling and a threat to our democracy and the founding ideal of different people from different beliefs and ideas all living peacefully under a single flag.

The mood was very different than a year ago when I wrote The Super-Aggregators and the Russians, riffing off of a tweet from Senator Mark Warner, the vice-chairman of the Intelligence Committee:

This is why I was confused that Senator Warner made a big deal out of the fact Facebook was paid in Russian Rubles: the entire premise of the company’s revenue model is that anyone can run an ad without having to talk to another human, and obviously a key component of such a model is supporting multiple currencies.

Again, though, this is the first such model in economic history: it seems I am the one who was blinded by my having experienced the meaning of scale…it is not at all unrealistic that this be very remarkable to everyone else, even someone with the technical and business background of Senator Warner. It would immediately be eyebrow-raising should any of the companies he managed or was invested in suddenly started transacting in Russian Rubles! For a super-aggregator, though, it is not only unremarkable, it is the system working as designed.

This applies to the content of those ads, too: last week, when ProPublica reported that Facebook enabled anti-Semitic targeting, I told a friend that a similar story would come out about Google within a week; it only took one day. When you make something frictionless — which is another way of describing zero transaction costs — it becomes easier to do everything, both good and evil.

Both Sandberg and Dorsey admitted to significant shortcomings in their respective company’s approaches as well, effectively owning up to The Pollyannish Assumption (“the pollyannish view of the Internet [is] the idea that everything is mostly good but for some bad apples. A more realistic view [is] that humanity is capable of both great beauty and tremendous evil, and that the Internet makes it easier to express both”). Sandberg said in her opening remarks:

At its best Facebook plays a positive role in our democracy enabling representatives to connect with their constituents, reminding people to register and to vote, and giving people a place to freely express express their opinions about the issues that matter to them. However, we’ve also seen what can happen when our service is abused. As a bipartisan report from this committee said, Russia used social media as part of, and I quote, “A comprehensive and multifaceted campaign to sow discord, undermine democratic institutions, and interfere in U.S. elections and those of our allies.” We were too slow to spot this and too slow to act. That is on us. This interference was completely unacceptable. It violated the values of our company and of the country we love.

Dorsey made a similar admission that I thought really cut to the heart of the issue (this will be a regular theme). Forgive the long excerpt, but I think it’s worth it:

First I want to step back and share our view of Twitter’s role in the world. We believe many people use Twitter as a digital public square to gather from all around the world to see what’s happening and have a conversation about what they see. In any public space you’ll find inspired ideas and you’ll find lies and deception; people who want to help others and unify, and people who want to hurt others and themselves and divide. What separates a physical and digital public space is greater accessibility and velocity.

We’re extremely proud of helping to increase the accessibility and velocity of a simple free and open exchange. We believe people will learn faster by being exposed to a wide range of opinions and ideas, and it helps them make our nation and the world feel a little bit smaller. We are not proud of how that free and open exchange has been weaponized and used to distract and divide people and our nation. We found ourselves unprepared and ill-equipped for the immensity of the problems that we’ve acknowledged: abuse, harassment, troll armies, propaganda through bots and human coordination misinformation campaigns, and divisive filter bubbles. That’s not a healthy public square. Worse a relatively small number of bad faith actors were able to game twitter to have an outsize impact.

Our interests are aligned with the American people and this committee: if we don’t find scalable solutions to the problems we’re now seeing, we lose our business and we continue to threaten the original privilege and liberty we were given to create Twitter in the first place. We weren’t expecting any of this when we created Twitter over 12 years ago, and we acknowledge the real world negative consequences of what happened and we take the full responsibility to fix it.

This contrast between Sandberg and Dorsey would be repeated throughout the hearing: Sandberg, as she always is, was extremely polished and in total command of her talking points; Dorsey, meanwhile, started out in the same place, but again and again went much deeper into the fundamental nature of the problem.

Dorsey and Incentives
To that end, the second part of Dorsey’s opening statement was even more striking:

We’ve learned from 2016 and more recently from other nations elections how to protect the integrity of elections: better tools, stronger policy, and new partnerships are already in place. We intend to understand the efficacy of these measures to continue to get better, but we all have to think a lot bigger and decades past today. We must ask the question: what is Twitter incentivizing people to do or not do and why? The answers will lead to tectonic shifts in Twitter and how our industry operates. Required changes won’t be fast or easy.

Today we’re committing to the people and this committee to do that work and do it openly. We’re here to contribute to a healthy public square, not compete to have the only one. We know that’s the only way our business thrives and helps us all defend against these new threats.

Dorsey returned to the issue of incentives repeatedly:

We need to question a lot of the fundamentals that we started with 12 years ago in the form of incentives, when people use our product every single day, when they open our app, what are we incentivizing them to do — not telling them what to do — what are we actually incentivizing them to do, and that certainly speaks to the buttons that we have in our service all the way to our business model

And:

I do believe it goes a lot deeper than just the alignment of our company’s incentives with this committee and the American people. I believe we need to question the fundamental incentives that are in our product today; every time someone opens up our service, every time someone opens up our app, we are implicitly incentivizing them to do something or not to do something, and that extends all the way to our business [model], and those answers that we get from asking that question are going to create massive shifts in how Twitter operates and I also believe how our industry operates.

This, needless to say, was a topic that Sandberg was not at all interested in exploring, and she easily deflected the one question she had about what drives user engagement on Facebook. That makes sense though: Facebook has a lot more to lose than Twitter. The company is far bigger and far more profitable, and given its sheer scale, has customers that are likely much more difficult to keep engaged relative to Twitter.

After all, when a company can basically do nothing right for 12 years yet still be relevant there is something in the product itself that inherently sticky; I don’t have any numbers to back this up, but I strongly suspect Twitter’s core userbase is actually more engaged than nearly all Facebook users, there just aren’t (relatively speaking) that many of them. Perhaps Dorsey has more leeway to think about what Twitter as a company is doing to drive unhealthy engagement; it certainly is interesting to think about what this might mean in the long run for how Twitter thinks about its business model.

Facebook, though, is locked in: Sandeberg declared unapologetically (as she should!): “We sell ads.”

Google’s Absence
The other member of the digital ad duopoly is, of course, Google, and as multiple Senators took care to point out, the company deigned to send a top executive (Google offered to send its Chief Legal Officer but Burr refused to accept his testimony).

Google’s empty seat

The general sentiment appears to be that this was a mistake by Google: not only was the company pilloried but also missed out on a generally congenial hearing that, as I noted above, was more sympathetic towards the challenges these companies face and generally appreciative of their efforts to date (particularly Facebook; Twitter received quite a bit of criticism in the House hearing in particular for being slow to take down content like clear misinformation or offers to sell drugs). Surely it would have been worth the positive PR of sending CEO Sundar Pichai to yes, take a lump or two, but also express how serious Google was taking the problem and receive compliments on what they had done to fix it.

In fact, though, I think Google’s goal is orthogonal to that: the company very much wants Russian meddling and misinformation to be classified as a “social media” problem, and by extension, establish that Google is not a social media company. Rather, that is for Facebook (and Twitter) to handle (or, more accurately, be blamed for).

This, by the way, is not completely unreasonable: Google didn’t have nearly the number of issues with foreign interference that Facebook and Twitter did, because, well, it’s not a social network. Sandberg, asked to define social media, declared:

Social media enables you to share what you want to share when you want to share it without asking permission anyone.

That’s not Google Search; what it is, though, is YouTube, and the executive that should have been there is not Sundar Pichai but YouTube CEO Susan Wojcicki.

To be sure, there was also less Russian misinformation on YouTube than Facebook or Twitter, probably in part because video is more difficult to produce. All of the essential problems of social media, though — and all of its promise — are just as endemic to YouTube as they are to Facebook. The velocity, the incentives towards engagement above all else, and ultimately, the way we as a society should think about solutions.

This cuts in a positive direction as well, not least from a business perspective: YouTube remains a tremendous growth opportunity for Google, particularly when it comes to brand advertising; Google very much has a stake in how all of this plays out. It is disappointing the company apparently wants the upside of having a social media network where anyone can share what they want without asking permission, while pretending the downsides aren’t its problem.

Cognitive Economics: How Self-Organization and Collective Intelligence Works – Evonomics

i.e. those responsible for strategy. As argued by Eric Beinhocker, good organisations adhere to the principle of ‘big what, little how’. That is, strategy sets high-level settings and direction, but doesn’t solve the detail.

But self-organization is not an altogether-coherent concept and has often turned out to be misleading as a guide to collective intelligence. It obscures the work involved in organization and in particular the hard work involved in high-dimensional choices. If you look in detail at any real example—from the family camping trip to the operation of the Internet, open-source software to everyday markets, these are only self-organizing if you look from far away. Look more closely and different patterns emerge. You quickly find some key shapers—like the designers of underlying protocols, or the people setting the rules for trading. There are certainly some patterns of emergence. Many ideas may be tried and tested before only a few successful ones survive and spread. To put it in the terms of network science, the most useful links survive and are reinforced; the less useful ones wither. The community decides collectively which ones are useful.

Source: Cognitive Economics: How Self-Organization and Collective Intelligence Works – Evonomics

Cognitive Economics: How Self-Organization and Collective Intelligence Works – Evonomics

And design, as argued, is the ‘science if the particular’.

Friedrich Hayek gave eloquent descriptions of the virtues of self- organization, and counterposed the distributed wisdom of the network to the centralized and hierarchical wisdom of science or the state: “It is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But there is a body of very important but unorganized knowledge: the knowledge of the particular circumstances of time and place. Practically everyone has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his . . . cooperation.”

Source: Cognitive Economics: How Self-Organization and Collective Intelligence Works – Evonomics

What is the Morally Appropriate Language in Which to Think and Write? | Literary Hub

Something about recursiveness and reflexivity and mapping to reality…

India as a country, a nation-state, was a British idea. So, the idea of English is as good or as bad as the idea of India itself. Writing or speaking in English is not a tribute to the British Empire, as the British imperial historian had tried to suggest to me, it is a practical solution to the circumstances created by it.

Source: What is the Morally Appropriate Language in Which to Think and Write? | Literary Hub