Invisible asymptotes

"It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle." - Sun Tzu
 

My first job at Amazon was as the first analyst in strategic planning, the forward-looking counterpart to accounting, which records what already happened. We maintained several time horizons for our forward forecasts, from granular monthly forecasts to quarterly and annual forecasts to even five and ten year forecasts for the purposes of fund-raising and, well, strategic planning.

One of the most difficult things to forecast was our adoption rate. We were a public company, though, and while Jeff would say, publicly, that "in the short run, the stock market is a voting machine, in the long run, it's a scale," that doesn't provide any air cover for strategic planning. It's your job to know what's going to happen in the future as best as possible, and every CFO of a public company will tell you that they take the forward guidance portion of their job seriously. Because of information asymmetry, analysts who cover your company depend quite a bit on guidance on quarterly earnings calls to shape their forecasts and coverage for their clients. It's not just that giving the wrong guidance might lead to a correction in your stock price but that it might indicate that you really have no idea where your business is headed, a far more damaging long-run reveal.

It didn't take long for me to see that our visibility out a few months, quarters, and even a year was really accurate (and precise!). What was more of a puzzle, though, was the long-term outlook. Every successful business goes through the famous S-curve, and most companies, and their investors, spend a lot of time looking for that inflection point towards hockey-stick growth. But just as important, and perhaps less well studied, is that unhappy point later in the S-curve, when you hit a shoulder and experience a flattening of growth.

One of the huge advantages for us at Amazon was that we always had a fairly good proxy for our total addressable market (TAM). It was easy to pull the statistics for the size of the global book market. Just as a rule of thumb, one could say that if we took 10% of the global book market it would mean our annual revenues would be X. One could be really optimistic and say that we might even expand the TAM, but finance tends to be the conservative group in the company by nature (only the paranoid survive and all that).

When I joined Amazon I was thrown almost immediately into working with a bunch of MBA's on business plans for music, video, packaged software, magazines, and international. I came to think of our long-term TAM as a straightforward layer cake of different retail markets.

Still, the gradient of adoption was somewhat of a mystery. I could, in my model, understand that one side of it was just exposure. That is, we could not obtain customers until they'd heard of us, and I could segment all of those paths of exposure into fairly reliable buckets: referrals from affiliate sites (we called them Associates), referrals from portals (AOL, Excite, Yahoo, etc.), and word-of-mouth (this was pre-social networking but post-email so the velocity of word-of-mouth was slower than it is today). Awareness is also readily trackable through any number of well-tested market research methodologies.

Still, for every customer who heard of Amazon, how could I forecast whether they'd make a purchase or not? Why would some people use the service while others decided to pass?

For so many startups and even larger tech incumbents, the point at which they hit the shoulder in the S-curve is a mystery, and I suspect the failure to see it occurs much earlier. The good thing is that identifying the enemy sooner allows you to address it. We focus so much on product-market fit, but once companies have achieved some semblance of it, most should spend much more time on the problem of product-market unfit.

For me, in strategic planning, the question in building my forecast was to flush out what I call the invisible asymptote: a ceiling that our growth curve would bump its head against if we continued down our current path. It's an important concept to understand for many people in a company, whether a CEO, a product person, or, as I was back then, a planner in finance.

Amazon's invisible asymptote

Fortunately for Amazon, and perhaps critical to much of its growth over the years, perhaps the single most important asymptote was one we identified very early on. Where our growth would flatten if we did not change our path was, in large part, due to this single factor.

We had two ways we were able to flush out this enemy. For people who did shop with us, we had, for some time, a pop-up survey that would appear right after you'd placed your order, at the end of the shopping cart process. It was a single question, asking why you didn't purchase more often from Amazon. For people who'd never shopped with Amazon, we had a third party firm conduct a market research survey where we'd ask those people why they did not shop from Amazon.

Both converged, without any ambiguity, on one factor. You don't even need to rewind to that time to remember what that factor is because I suspect it's the same asymptote governing e-commerce and many other related businesses today.

Shipping fees.

People hate paying for shipping. They despise it. It may sound banal, even self-evident, but understanding that was, I'm convinced, so critical to much of how we unlocked growth at Amazon over the years.

People don't just hate paying for shipping, they hate it to literally an irrational degree. We know this because our first attempt to address this was to show, in the shopping cart and checkout process, that even after paying shipping, customers were saving money over driving to their local bookstore to buy a book because, at the time, most Amazon customers did not have to pay sales tax. That wasn't even factoring in the cost of getting to the store, the depreciation costs on the car, and the value of their time.

People didn't care about this rational math. People, in general, are terrible at valuing their time, perhaps because for most people monetary compensation for one's time is so detached from the event of spending one's time. Most time we spend isn't like deliberate practice, with immediate feedback.

Wealthy people tend to receive a much more direct and immediate payoff for their time which is why they tend to be better about valuing it. This is why the first thing that most ultra-wealthy people I know do upon becoming ultra-wealthy is to hire a driver and start to fly private. For most normal people, the opportunity cost of their time is far more difficult to ascertain moment to moment.

You can't imagine what a relief it is to have a single overarching obstacle to focus on as a product person. It's the same for anyone trying to solve a problem. Half the comfort of diets that promise huge weight loss in exchange for cutting out sugar or carbs or whatever is feeling like there's a really simple solution or answer to a hitherto intractable, multi-dimensional problem.

Solving people's distaste for paying shipping fees became a multi-year effort at Amazon. Our next crack at this was Super Saver Shipping: if you placed an order of $25 or more of qualified items, which included mostly products in stock at Amazon, you'd receive free standard shipping.

The problem with this program, of course, was that it caused customers to reduce their order frequency, waiting until their orders qualified for the free shipping. In select cases, forcing customers to minimize consumption of your product-service is the right long-term strategy, but this wasn't one of those.

That brings us to Amazon Prime. This is a good time to point out that shipping physical goods isn't free. Again, self-evident, but it meant that modeling Amazon Prime could lead to widely diverging financial outcomes depending on what you thought it would do to the demand curve and average order composition.

To his credit, Jeff decided to forego testing and just go for it. It's not so uncommon in technology to focus on growth to the exclusion of all other things and then solve for monetization in the long run, but it's easier to do so for a social network than a retail business with real unit economics. The more you sell, the more you lose is not and has never been a sustainable business model (people confuse this for Amazon's business model all the time, and still do, which ¯\_(ツ)_/¯).

The rest, of course, is history. Or at least near-term history. It turns out that you can have people pre-pay for shipping through a program like Prime and they're incredibly happy to make the trade. And yes, on some orders, and for some customers, the financial trade may be a lossy one for the business, but on net, the dramatic shift in the demand curve is stunning and game-changing.

And, as Jeff always noted, you can make micro-adjustments in the long run to tweak the profit leaks. For some really large, heavy items, you can tack on shipping surcharges or just remove them from qualifying for Prime. These days, some items in Amazon are marked as "Add-on items" and you can only order them in conjunction with enough other items such that they can be shipped with those items rather than in isolation.

[Jeff counseled the same "fix it later" strategy in the early days when we didn't have good returns tracking. For a window of time in the early days of Amazon, if you shipped us a box of books for returns, we couldn't easily tell if you'd purchase them at Amazon and so we'd credit you for them, no questions asked. One woman took advantage of this loophole and shipped us boxes and boxes of books. Given our limited software resources, Jeff said to just ignore the lady and build a way to solve for that later. It was really painful, though, so eventually customer service representatives all shared, amongst themselves, the woman's name so they could look out for it in return requests even before such systems were built. Like a mugshot pinned to every monitor saying "Beware this customer." A tip of the hat to you, maam, wherever you are, for your enterprising spirit in exploiting that loophole!]

Prime is a type of scale moat for Amazon because it isn't easy for other retailers to match from a sheer economic and logistical standpoint. As noted before, shipping isn't actually free when you have to deliver physical goods. The really challenging unit economics of delivery businesses like Postmates, when paired with people's aversion for paying for shipping, makes for tough sledding, at least until the cost of delivering such goods can be lowered drastically, perhaps by self-driving cars or drones or some such technology shift.

Furthermore, very few customers shop enough with retailers other than Amazon to make a pre-pay program like Prime worthwhile to them. Even if they did, it's very likely Amazon's economies of scale in shipping and deep knowledge of how to distribute their inventory optimally means their unit economics on delivery are likely superior.

The net of it is that long before Amazon hit what would've been an invisible asymptote on its e-commerce growth it had already erased it.

Know thine enemy.

Invisible asymptotes are...invisible

An obvious problem for many companies, however, is that they are creating new types of businesses and services that don't lend themselves to easily identifying such invisible asymptotes. Many are not like Amazon where there are readily tracked metrics like the size of the global book market with which to peg their TAM.

Take social networks, for example. What's the shoulder of the curve for something like Facebook? Twitter? Instagram? Snapchat?

Some of the limits to their growth are easier to spot than others. For messaging and some more general social networking apps, for example, in many cases network effects are geographical. Since these apps build on top of real-world social graphs, and many of those are geographically clustered, there are winner-take-all dynamics such that in many countries one messaging app dominates, like Kakao in Korea or Line in Taiwan. There can be geo-political considerations, too, that help ensure that that WeChat will dominate in China to the exclusion of all competitors, for example.

For others, though, it takes a bit more product insight, and some might say intuition, to see the ceiling before you bump into it. For both employees and investors, understanding product-market unfit follows very closely on identifying product-market fit as an existential challenge.

Without direct access to internal metrics and research, it's difficult to use much other than public information and my own product intuition to analyze potential asymptotes for many companies, but let's take a quick survey of several more prominent companies and consider some of their critical asymptotes (these companies are large enough that they likely have many, but I'll focus on the macro). You can apply this to startups, too, but there are some differences between achieving initial product market fit and avoiding the shoulder in the S-curve after already having found it.

Twitter

Let's start with Twitter, for many in tech the most frustrating product from the perspective of the gap between the actual and the potential. Its user growth has been flat for quite some time, and so it can be said to have already run full speed into an invisible asymptote. In quarterly earnings calls, it's apparent management often have no idea if or when or how that might shift because their guidance is often a collective shrug.

One popular early school of thought on Twitter, a common pattern with most social networks, is that more users need to experience what the power users or early adopters are experiencing and they'll turn into active users. Many a story of social networks who've continued to grow point to certain keystone metrics as pivotal to unlocking product-market fit. For example, once you've friended 30 people on Facebook, you're hooked. For Twitter, an equivalent may be following enough people to generate an interesting feed.

Pattern-matching moves more quickly through Silicon Valley than almost any other place I've lived, so stories like that are passed around through employees and Board meetings and other places where the rich and famous tech elite hobnob, and so it's not surprising that this theory is raised for every social network that hits the shoulder in their S-curve.

There's more than a whiff of Geoffrey Moore's Crossing the Chasm in this idea, some sense that moving from early adopters to the mainstream involves convincing more users to use the same product/service as early adopters do.

In the case of Twitter, I think the theory is wrong. Given the current configuration of the product, I don't think any more meaningful user growth is possible, and tweaking the product as it is now won't unlock any more growth. The longer they don't acknowledge this, the longer they'll be stuck in a Red Queen loop of their own making.

Sometimes, the product-market fit with early adopters is only that. The product won't go mainstream because other people don't want or need that product. In these cases, the key to unlocking growth is usually customer segmentation, creating different products for different users.

Mistaking one type of business for the other can be a deadly mistake because the strategies for addressing them are so different. A common symptom of this mistake is not seeing the shoulder in the S-curve coming at all, not understanding the nature of your product-market unfit.

I believe the core experience of Twitter has reached most everyone in the world who likes it. Let's examine the core attributes of Twitter the product (which I treat as distinct from Twitter the service, the public messaging protocol).

It is heavily text-based, with 140 and now 280 character limit snippets of text from people you've followed presented in a vertical scrolling feed in some algorithmic order, which, for the purposes of this exercise, I'll just consider roughly chronological.

For fans, most of whom are infovores, the nature of product-market fit is, as with many of our tech products today, one of addiction. Because the chunks of text are short, if one tweet is of no interest, you can quickly scan and scroll to another with little effort. Discovering tweets of interest in what appears to be a largely random order rewards the user with dopamine hits on that time-tested Skinner box variable frequency. Instead of rats hitting levers for pellets of food, power Twitter user push or pull on their phone screens for the next tasty pellet of text.

For infovores, text, in contrast to photos or videos or music, is the medium of choice from a velocity standpoint. There is deep satisfaction in quickly decoding the textual information, the scan rate is self-governed on the part of the reader, unlike other mediums which unfold at their own pace (this is especially the case with video, which infovores hate for its low scannability).

Over time, this loop tightens and accelerates through the interaction of all the users on Twitter. Likes and retweets and other forms of feedback guide people composing tweets to create more of the type that receive positive feedback. The ideal tweet (which I mean one that will receive maximum positive feedback) combines some number of the following attributes:

  • Is pithy. Sounds like a fortune cookie. The character limit encourages this type of compression.
  • Is slightly surprising. This can be a contrarian idea or just a cliche encoded in a semi-novel way.
  • Rewards some set of readers' priors, injecting a pleasing dose of confirmation bias directly into the bloodstream.
  • Blasts someone that some set of people dislike intensely. This is closely related to the previous point.
  • Is composed by someone famous, preferably someone a lot of people like but don't consider to be a full-time Tweeter, like Chrissy Teigen or Kanye West.
  • Is on a topic that most people think they understand or on which they have an opinion.

Of course, the set of ideal qualities varies by subgroup on Twitter. Black Twitter differs from rationalist Twitter which differs from NBA Twitter. The meta point is that the flywheel spins more and more quickly over time within each group.

The problem is that for those who don't use Twitter, almost all of its ideal attributes among the early adopter cohort are those which other people find bewildering and unattractive. Many people find the text-heavy nature of Twitter to be a turn-off. The majority of people, actually.

The naturally random sort order of ideas that comes from the structure of Twitter, one which pings the pleasure centers of the current heavy user cohort when they find an interesting tweet, is utterly perplexing to those who don't get the service. Why should they hunt and peck for something of interest? Why are conversations so difficult to follow (actually, this is a challenge even for those who enjoy Twitter)? Why do people have to work so hard to parse the context of tweets?

Falling into the trap of thinking other users will be like you is especially pernicious because the people building the product are usually among that early adopter cohort. The easiest north star for a product person is their own intuition. But if they're working on a product that requires customer segmentation, being in the early adopter cohort means one's instincts will keep guiding you towards the wrong North star and the company will just keep bumping into the invisible asymptote without any idea why.

This points to an important qualifier to the "crossing the chasm" idea of technology diffusion. If the chasm is large enough, the same product can't cross it. Instead, on the other side of the gaping chasm is just a different country altogether, with different constituents with different needs.

I use Twitter a lot (I recently received a notification I'd passed my 11-year anniversary of joining the service) but almost everyone in my family, from my parents to my siblings to my girlfriend to my nieces and nephews has tried and given up on Twitter. It doesn't fulfill any deep-seated need for any of them.

It's not surprising to me that Twitter is populated heavily by journalists and a certain cohort of techies and intellectuals who all, to me, are part of a broader species of infovore. For them, opening Twitter must feel as if they've donned Cerebro and have global contact with thousands of brains all over the world, as if the fabric of their brain had been flattened and stretched out wide and laid on top of that of millions of others brains all over the world.

Quiet, I am reading the tweets.

Mastering Twitter is already something this group of people do all the time in their lives and jobs, only Twitter accelerates it, like a bicycle for intellectual conversation and preening. Twitter, at its best, can provide a feeling of near real-time communal knowledge sharing that satisfies some of the same needs as something like SoulCycle or Peloton. A feeling of communion that also feels like it's productive.

If my instincts are right, then all the iterating around the margins on Twitter won't do much of anything to change the growth curve of the service. It might improve the experience for the current cohort of users and increase usage (for example, curbing abuse and trolls is an immediate and obvious win for those who experience all sorts of terrible harassment on the service), but it doesn't change the fact that this core Twitter product isn't for all the people who left the club long ago, soon after they walked in and realized it was just a bunch of nerds who'd ordered La Croix bottle service and were sitting around talking about Bitcoin and stoicism and transcendental meditation.

The good news is that the Twitter service, that public messaging protocol with a one-way follow model, could be the basis for lots of products that might appeal to other people in the world. Knowing the enemy can prevent wasting time chasing the wrong strategy.

Unfortunately, one of the main paths towards coming up with new products built on top of that protocol was the third party developer program, and, well, Twitter has treated its third party developers like unwanted stepchildren for a long time. For whatever reason, it's difficult to speculate without having been there, Twitter's rate of product development internally has been glacial. A vibrant third party-developer program could have helped by massively increasing the vectors of development on Twitter's very elegant public messaging protocol and datasets.

[Note, however, that I'm sympathetic to tech companies that restrict building clones of their service using their API's. No company owes it to others to allow people to build direct competitors to their own product. Most people don't remember, but Amazon's first web services offering was for affiliates to build sites to sell things. Some sites started building massive Amazon clones and so Amazon's web services evolved into other forms, eventually settling on what most people know it as today.]

In addition, I've long wondered if the shutting out of third party developers on Twitter was an attempt to aggregate and own all their own ad inventory. Both these problems could've been solved by tweaking the Twitter third party development program. Developers could be offered two paths.

One option is that for every X number of tweets a developer pulled, they'd have to carry and display a Twitter-inserted ad unit. This would make it possible for Twitter to support third-party clients like Tweetbot that compete somewhat with Twitter's own clients. Maybe one of these developers would come up with improvements on top of Twitter's own client apps, but in doing so they'd increase Twitter's ad inventory.

The second option would be to pay some fixed fee for every X tweets pulled. That would force the developer to come up with some monetization scheme on their own to cover their usage, but at least the option would exist. I don't doubt that some enterprising developers might come up with some way to monetize a particular use case, for example for business research.

Twitter the product/app has hit its invisible asymptote. Twitter the protocol still has untapped potential.

Snapchat

Snapchat is another example of a company that's hit a shoulder in its growth curve. Unlike Twitter, though, I suspect its invisible asymptote is less an issue of its feature set and more one of a generational divide.

That's not to say that making the interface less inscrutable earlier on wouldn't have helped a bit, but I suspect only at the margins. In fact, the opaque nature of the interface probably served Snapchat incredibly well when the product came along, regardless of whether or not it was intended that way. Snapchat came along at a moment when kids' parents were joining Facebook, and when Facebook had been around long enough for the paper trail of its early, younger users to come back and bite some of them.

Along comes a service that not only wipes out content by default after a short period of time but is inscrutable to the very parents who might crash the party. In fact, there's an entire class of products for which I believe an Easter Egg-like interface is actually preferable to an elegant, self-describing interface, long seen as the apex of UI design (more on that another day).

I've written before about selfies as a second language. At the root of that phenomenon is the idea that a generation of kids raised with smartphones with a camera front and back have found the most efficient way to communicate is with the camera, not the keyboard. That's not the case for an older cohort of users who almost never send selfies as a first resort. The very default of Snapchat to the camera screen is such a bold choice that it will probably never be the messaging app of choice for old folks, no matter how Snapchat moves around and re-arranges its other panes.

More than that, I suspect every generation needs spaces of its own, places to try on and leave behind identities at low cost and on short, finite time horizons. That applies to social virtual spaces as much as it does to physical spaces.

Look at how old people use Snapchat and you'll see lots of use of Stories. Watch a young person use Snapchat and it's predominantly one-to-one messaging using the camera (yes, I know some of the messages I receive on Snap are the same ones that person is sending to everyone one-to-one, but the hidden nature of that behavior allows me to indulge an egocentric rather than Copernican model of the universe). Now, it's possible for one app to serve multiple audiences that way, but it will either have to compromise all or some of its user experience to do so.

At a deeper level, I think a person's need for ephemeral content varies across one's lifetime. It's of much higher value when one is young, especially in formative years. As one ages, and time's counter starts to run low, one turns nostalgic, and the value of permanent content, especially from long bygone days, increases, serving as beautifully aged relics of another era. One also tends to be more adept at managing one's public image the more time passes, lessening the need for ephemerality.

All this is to say that I don't think making the interface of Snapchat easier to use is going to move it off of the shoulder on its S-curve. That's addressing a different underlying cause than the one that lies behind its invisible asymptote.

The good news for Snapchat is that I don't think Facebook is going to be able to attract the youngsters. I don't care if Facebook copies Snapchat's exact app one for one, it's not going to happen. The bad news for Snapchat is that it probably isn't going to attract the oldies either. The most interesting question is whether Snapchat's cohort stays with it for life, and the next interesting question is who attracts the next generation of kids to get their first smartphones. Will they, like every generation of youth before them, demand a social network of their own? Sometimes I think they will just to claim a namespace that isn't already spoken for. Who wants to be joesmith43213 when you can be joesmith on some new sexy social network?

As a competitor, however, Instagram is more worrisome than Facebook. It came along after Facebook, as Snapchat did, and so it had the opportunity to be a social network that a younger generation could roam as pioneers, mining so much social capital yet to be claimed. It is also largely an audio-visual network which is appealing to a more visually literate generation.

When Messenger incorporated Stories into its app, it felt like a middle-aged couple dressing in cowboy chic and attending Coachella. When Instagram cribbed Stories, though, it addressed a real supply-side content creation issue for the same young'uns who used Snapchat. That is, people were being too precious about what they shared on Instagram, decreasing usage frequency. By adding Stories, they created a mechanism that wouldn't force content into the feed and whose ephemerality encouraged more liberal capture and sharing without the associated guilt.

This is a general pattern among social networks and products in general: to broaden their appeal they tend to broaden their use cases. It's rare to see a product adhere strictly to its early specificity and still avoid hitting a shoulder in their adoption S-curve. Look at Facebook today compared to Facebook in its early days. Look at Amazon's product selection now compared to when it first launched.

It takes internal fortitude for a product team to make such concessions (I would say courage but we need to sprinkle that term around less liberally in tech). The stronger the initial product market fit, the more vociferously your early adopters will protest when you make any changes. Like a band that is accused of selling out, there is an inevitable sense that a certain sharpness of flavor, of choice, has seeped out as more and more people join up and as a service loosens up and accommodates more more use cases.

I remember seeing so many normally level-headed people on Twitter threaten to abandon the service when they announced they were increasing the character limit from 140 to 280. The irony, of course, was that the character-limit increase likely improved the service for its current users while doing nothing to attract people who didn't use the service, even though the move was addressed mostly to heathen.

Back to Snapchat. I wrote a long time ago that the power of social networks lies in their graph. That means many things, and in Snapchat's case it holds a particularly fiendish double bind. That Snapchat is the social network claimed by the young is both a blessing and a curse. Were a bunch of old folks to suddenly flock to Snapchat, it might induce a case of Groucho Marx's, "I don't care to belong to a club that accepts people like me as members."

Facebook

On the dimension of utility, Facebook's network effects continue to be pure and unbounded. The more people that are on Facebook, the more it's useful for certain things for which a global directory is useful. Even though many folks don't use Facebook a lot, it's rare I can't find them on Messenger if I don't have their email address or phone number. The complexity of analyzing Facebook is that it serves different needs in different countries and markets, social network having strong path dependency in their usage patterns. In many countries, Facebook is the internet; it's odd as an American to travel to countries where businesses' only presence online is a Facebook page, so accustomed I am to searching for American businesses on the web or Yelp first.

When it comes to the "social" aspect of social networking, the picture is less clear-cut. Here I'll focus on the U.S. market since it's the one I'm most familiar with. Because Facebook is the largest social network in history, it may be encountering scaling challenges few other entities have ever seen.

The power of a social network lies in its graph, and that is a conundrum in many ways. One is that a massive graph is a blessing until it's a curse. For social creatures like humans who've long lived  in smaller networks and tribes, a graph that conflates everyone you know is intimidating to broadcast to, except for those who have no compulsion about performing no matter the audience size: famous people, marketers, and those monstrous people who share everything about their lives. You know who you are.

This is one of the diseconomies of scale for social networks that Facebook is first to run into because of its unprecedented size. Imagine you're in a room with all your family, friends, coworkers, casual acquaintances, and a lot of people you met just once but felt guilty about rejecting a friend request from. It's hundreds, maybe even thousands of people. What would you say to them? We know people maintain multiple identities for different audiences in their lives. Very few of us have to cultivate an identity for that entire blob of everyone we know. It's a situation one might encounter in the real world only a few times in life, perhaps at one's wedding, and later one's funeral. Online, though? It happens to be the default mode on Facebook's News Feed.

It's no coincidence that public figures, those who have the most practice at having to deal with this problem, are so guarded. As your audience grows larger, the chance that you'll offend someone deeply with something you say approaches 1.

When I scan my Facebook feed, I see fewer and fewer people I know sharing anything at all. Map one's sharing frequency with the size of one's friend list on Facebook and I highly suspect it looks like this:

friend-post-frequency-facebook.png

Again, not everyone is like this, some psychopaths who are comfortable sharing their thoughts no matter the size of the audience, but these people are often annoying, the type who dive right into politics at Thanksgiving before you've even spooned gravy over your turkey. This leads to a form of adverse selection where a few over-sharers take over your News Feed.

[Not everything one shares gets distributed to one's entire friend graph given the algorithmic feed. But you as the one sharing something have no idea who will see it so you have to assume that any and every person in your graph will see it. The chilling effect is the same.]

Another form of diseconomy of scale is behind the flight to Snapchat among the young, as outlined earlier. A sure way to empty a club or a dance floor is to have the parents show up; few things are more traumatic then seeing your Dad pretend-grind on your Mom when "Yeah" by Usher comes on. Having your parents in your graph on Facebook means you have to assume they're listening, and there isn't some way to turn on the radio very loudly or run the water as in a spy movie when you're trying to pass secrets to someone in a room that's bugged. The best you can do is communicate in code to which your parents don't own the decryption key; usually this takes the form of memes. Or you take the communication over to Snapchat.

Another diseconomy of scale is the increasing returns to trolling. Facebook is more immune tof this thanks to its bi-directional friending model than, say, Twitter, with its one-way follow model and public messaging framework. On Facebook, those wishing to sow dissension need to be a bit more devious, and as revelations from the last election showed, there are means to a person's heart, to reach them directly or indirectly, through confirmation bias and flattery. The Iago playbook from Othello. On Twitter, there's no need for such scheming, you can just nuke people from your keyboard without their consent.

All of this is to say I suspect many of Facebook's more fruitful vectors for rekindling their value for socializing lie in breaking up the surface area of their service. News Feed is so monolithic a surface as to be subject to all the diseconomies of scale of social networking, even as it makes it such an attractive advertising landscape.

The most obvious path to this is Groups, which can subdivide large graphs into ones more unified in purpose or ideology. Google+ was onto something with Circles, but since they hadn't actually achieved any scale they were solving a problem they didn't have yet.

Instagram

Where is Instagram's invisible asymptote? This is one of the trickier ones to contemplate as it continues to grow without any obvious end in sight.

One of the advantages to Instagram is that it came about when Facebook was broadening its acceptable media types from text to photos and video. Instagram began with just square photos with a simple caption, no links allowed, no resharing.

This had a couple of advantages. One is that it's harder to troll or be insufferable in photos than it is in text. Photos tend to soften the edge of boasts and provocations. More people are more skilled at being hurtful in text than photos. Instagram has tended to be more aggressive than other networks at policing the emotional tenor of its network, especially in contrast to, say Twitter, turning its attention most recently to addressing trolls in the comment sections.

Of course photos are not immune to this phenomenon. The "look at my perfect life" boasting of Instagram is many people's chief complaint about the app and likely the primary driver of people feeling lousy after looking through their feed there. Still, outright antagonism with Instagram, given it isn't an open public graph like Twitter, is harder. The one direct vector is comments and Instagram is working on that issue.

In being a pure audio-visual network at a time when Facebook and most other networks were mixed-media, Instagram siphoned off many people for whom the best part of Facebook was just the photos and videos; again, we often, as with Twitter, over-estimate the product-market fit and TAM of text. If Facebook just showed photos and videos for a week I suspect their usage would grow, but since they own Instagram...

As with other social networks that grow, Instagram broadened its formats early on to head off several format-based asymptotes. Non-square photos and videos with gradually lengthening time limits have broadened the use cases and, more importantly, removed some level of production friction.

The move to copy Snapchat's Stories format was the next giant asymptote avoided. The precious nature of sharing on Instagram was a drag on posting frequency. Stories solves the supply-side issue for content several ways. One is that since it requires you to explicitly tap into viewing it from the home feed screen, it shifts the onus for viewing the content entirely to the audience. This frees the content creator from much of the guilt of polluting someone else's feed. The expiring nature of the content further removes another of a publisher's inhibitions about littering the digital landscape. It unlocked so much content that I now regularly fail to make it through more than a tiny fraction of Stories on Instagram. Even friends who don't publish a lot now often put their content in Stories rather than posting to the main feed.

The very format of Stories, with its full-screen vertical orientation, cues the user that this format is meant for the native way we hold our devices as smartphone photographers, rather than accommodating the more natural landscape way that audiences view the world, with eyes side-by-side in one's head. Stories includes accoutrements like gaudy stickers and text overlays and face filters that aren't in the toolset for Instagram's main feed photo/video composer, perhaps to preserve some aesthetic separation between the main feed and Stories.

There is a purity about Instagram which makes even its ads perfectly native: everything on the service is an audio-visual advertisement. I see people complain about the ad load in Instagram, but if you really look at your feed, it's always had an ad load of 100%.

I just opened my feed and looked through the first twenty posts, and I'd classify them all as ads: about how great my meal was, for beautiful travel destinations, for the exquisite craft of various photographers and cinematographers, for an actor's upcoming film, for Rihanna's new lingerie line or makeup drop, for an elaborate dish a friend cooked, for a current concert tour, for how funny someone is, for someone's gorgeous new headshot, and for a few sporting events and teams. And yes, a few of them were official Instagram ads.

I don't mean this in a negative way. One might lobby this accusation at all social networks, but the visual nature of Instagram absorbs the signaling function of social media in the most elegant and unified way. For example, messaging apps consist of a lot of communication that isn't advertising. But that's exactly why a messaging app like Messenger isn't as lucrative an ad platform as Instagram is and will be. If ads weren't marked explicitly, and if they weren't so obviously from accounts I don't follow, it's not clear to me that they'd be so jarringly different in nature than all the other content in the feed.

The irony is that, as Facebook broadened its use cases and supported media types to continue to expand, the purity of Instagram may have made it more scalable a network in some ways.

Of course, every product or service has some natural ceiling. To take one example, messaging with other folks is still somewhat clunky on Instagram, it feels tacked on. Considering how much young people use Snapchat as a messaging app of choice, there's likely attractive headroom for Instagram here.

Rumors Instagram is contemplating a separate messaging app make sense. It would be ironic if Instagram separated out the more broadcast nature of its core app from the messaging use case in two different apps before Snapchat did. As noted earlier, it feels as if Snapchat is constantly fighting to balance the messaging parts of its app with the more broadcast elements like Stories and Discover, and separate apps might be one way to solve that more effectively.

As with all social networks which are mobile-phone dominant, there are limits to what can be optimized for in a single app, when all you have to work with is a single rectangular phone screen. The mobile phone revolution forced a focus in design which created billions of dollars in value, but Instagram, like all phone apps, will run into the asymptote that is the limits of how much you can jam into one app.

Instagram has already had some experience in dealing with this conundrum, creating separate apps like Boomerang or Hyperlapse that keep a lid on the complexity of the Instagram app itself and which bring additional composition techniques to the top level of one's phone. I often hear people counsel against launching separate apps because of the difficulty of getting adoption of even a single app, but that doesn't mean that separate apps aren't sometimes the most elegant way to deal with the spatial design constraints of mobile.

On Instagram, content is still largely short in nature so longer narratives aren't common or well-supported. The very structure, oriented around a main feed algorithmically compiling a variety of content from all the account you follow, isn't optimized towards a deep dive into a particular subject matter or narrative like, say, a television or a streaming video app. The closest to long-form on Instagram is Live, but most of what I see of that is only loosely narrative, resembling more an extended selfie than a considered narrative. Rather than pursue long-form narrative, it may be that a more on-brand way to tackle the challenge of lengthening usage of the app is better stringing together of existing content, similar to how Snapchat can aggregate content from one location into a feed of sorts. That can be useful for things like concerts and sporting events and breaking news events like natural disasters, protests, and marches.

In addition, perhaps there is a general limit to how far a single feed of random content arranged algorithmically can go before we suffer pure consumption exhaustion. Perhaps seeing curated snapshots from everyone will finally push us all to the breaking point of jealousy and FOMO and, across a large enough number of users, an asymptote will emerge.

However, I suspect we've moved into an age where the upper bound on vanity fatigue has shifted much higher in a way that an older generation might find unseemly. Just as we've moved into a post-scarcity age of information, I believe we've moved into a post-scarcity age of identity as well. And in this world, it's more acceptable to be yourself and leverage social media for maximal distribution of yourself in a way that ties to the fundamental way in which the topology of culture has shifted from a series of massive centralized hub and spokes to a more uniform mesh.

A last possible asymptote relates to my general sense that massive networks like Facebook and Instagram will, at some point, require more structured interactions and content units (for example, a list is a structured content unit, as is a check-in) to continue scaling. Doing so always imposes some additional friction on the content creator, but the benefit is breaking one monolithic feed into more distinct units, allowing users the ability to shift gears mentally by seeing and anticipating the structure, much like how a magazine is organized.

To fill gaps in a person's free time, an endless feed is like an endless jar of liquid, able to be poured into any crevice in one's schedule and flow of attention. To demand a person's time, on the other hand, is a higher order task, and more structured content seems to do better on that front. People set aside dedicated time to play games like Fortnite or to watch Netflix, but less so to browse feeds. The latter happens on the fly. But ambition in software-driven Silicon Valley is endless and so at some point every tech company tries to obtain the full complement of Infinity Stones, whether by building them or buying them, like Facebook did with Instagram and Whatsapp.

Amazon's next invisible asymptote?

I started with Amazon, but it is worth revisiting as it is hardly done with its own ambitions. After having made such massive progress on the shipping fee asymptote, what other barriers to growth might remain?

On that same topic of shipping, the next natural barrier is shipping speed. Yes, it's great that I don't have to pay for shipping, but in time customer expectations inflate. Per Jeff's latest annual letter to shareholders:

One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’. I see that cycle of improvement happening at a faster rate than ever before. It may be because customers have such easy access to more information than ever before – in only a few seconds and with a couple taps on their phones, customers can read reviews, compare prices from multiple retailers, see whether something’s in stock, find out how fast it will ship or be available for pick-up, and more. These examples are from retail, but I sense that the same customer empowerment phenomenon is happening broadly across everything we do at Amazon and most other industries as well. You cannot rest on your laurels in this world. Customers won’t have it.
 

Why only two-day shipping for free? What if I want my package tomorrow, or today, or right now?

Amazon has already been working on this problem for over a decade, building out a higher density network of smaller distribution centers over its previous strategy of fewer, gargantuan distribution hubs. Drone delivery may have sounded like a joke when first announced on an episode of 60 Minutes, but it addresses the same problem, as does a strategy like Amazon lockers in local retail stores.

Another asymptote may be that while Amazon is great at being the site of first resort to fulfill customer demands for products, it is less capable when it comes to generating desire ex nihilo, the kind of persuasion typically associated more with a tech company like Apple or any number of luxury retailers.

At Amazon we referred to the dominant style of shopping on the service as spear-fishing. People come in, type a search for the thing they want, and 1-click it. In contrast, if you've ever taken your wife or girlfriend to the mall, you'll see a method of shopping more akin to the gathering half of hunting and gathering. Many outfits are picked off the rack and gazed at, held up against oneself in a mirror, turned around in the hand for contemplation. Hands brush across racks of clothing, fingers feeling fabric in search of something unknown even to the shopper.

This is browsing, and Amazon's interface has only solved some aspects of this mode of shopping. If you have some idea what you want, similarities carousels can guide one in some comparison shopping, and customer reviews serve as a voice on the shoulder, but it still feels somewhat utilitarian.

Amazon's first attempts at physical stories reflect this bias in its retail style. I visited an Amazon physical bookstore in University Village the last time I was in Seattle, and it struck me as the website turned into 3-dimensional space, just with a lot less inventory. Amazon Go sounds more interesting, and I can't wait to try it out, but again, its primary selling point is the self-serve, low-friction aspect of the experience.

When I think of creating desire, I think of my last and only visit to Milan, when a woman at an Italian luxury brand store talked me into buying a sportcoat I had no idea I wanted when I walked into the store. In fact, it wasn't even on display, so minimal was the inventory when I walked in.

She looked at me, asked me some questions, then went to the back and walked back out with a single option. She talked me into trying it on, then flattered me with how it made me look, as well as pointing out some of its most distinctive qualities. Slowly, I began to nod in agreement, and eventually I knew I had to be the man this sportcoat would turn me into when it sat on my shoulders.

This challenge isn't unique to Amazon. Tech companies in general have been mining the scalable ROI of machine learning and algorithms for many years now. More data, better recommendations, better matching of customer to goods, or so the story goes. But what I appreciate about luxury retail, or even Hollywood, is its skill for making you believe that something is the right thing for you, absent previous data. Seduction is a gift, and most people in technology vastly overestimate how much of customer happiness is solvable by data-driven algorithms while underestimating the ROI of seduction.

Netflix spent $1 million on a prize to improve its recommendation algorithms, and yet it's a daily ritual that millions of people stare at their Netflix home screen, scrolling around for a long time, trying to decide what to watch. It's not just Netflix, open any streaming app. The AppleTV, a media viewing device, is most often praised for its screensaver! That's like admitting you couldn't find anything to eat on a restaurant menu but the typeface was pleasing to the eye. It's not that data can't guide a user towards the right general neighborhood, but more than one tech company will find the gradient of return on good old seduction to be much steeper than they might realize.

Still, for Amazon, this may not be as dangerous a weakness as it would be for another retailer. Much of what Amazon sells is commodities, and desire generation can be offloaded to other channels who then see customers leak to Amazon for fulfillment. Amazon's logistical and customer service supremacy is a devastatingly powerful advantage because it directly precedes and follows the act of payment in the shopping value chain, allowing it to capture almost all the financial return of commodity retail.

And, as Jeff's annual letter to shareholders has emphasized from the very first instance, Amazon's mission is to be the world's most customer-centric company. One way to find continue to find vectors for growth is to stay attached at the hip to the fickle nature of customer unhappiness, which they're always quite happy to share under the right circumstances, one happy consequence of this age of outrage. There is such a thing as a price umbrella, but there's also one for customer happiness.

How to identify your invisible asymptotes

One way to identify your invisible asymptotes is to simply ask your customers. As I noted at the start of this piece, at Amazon we honed in on how shipping fees were a brake on our business by simply asking customers and non-customers.

Here's where the oft-cited quote from Henry Ford is brought up as an objection: “If I had asked people what they wanted, they would have said faster horses," he is reputed to have said. Like most truisms in business, it is snappy and lossy all at once.

True, it's often difficult for customers to articulate what they want. But what's missed is that they're often much better at pinpointing what they don't want or like. What you should hear when customers say they want a faster horse is not the literal but instead that they find travel by horse to be too slow. The savvy product person can generalize that to the broader need of traveling more quickly, and that problem can be solved any number of ways that don't involve cloning Secretariat or shooting their current horse up with steroids.

This isn't a foolproof strategy. Sometimes customers lie about what they don't like, and sometimes they can't even articulate their discontent with any clarity, but if you match their feedback with good analysis of customer behavior data and even some well-designed tests, you can usually land on a more accurate picture of the actual problem to solve.

A popular sentiment in Silicon Valley is that B2C businesses are more difficult product challenges than B2B because products and services for the business customer can be specified merely by talking to the customer while the consumer market is inarticulate about its needs, per the Henry Ford quote. Again, that's only partially true, and so many consumer companies I've been advising recently haven't pushed enough yet on understanding or empathizing with the objections of its non-adopters.

We speak often of the economics concept of the demand curve, but in product there is another form of demand curve, and that is the contour of the customers' demands of your product or service. How comforting it would be if it were flat, but as Bezos noted in his annual letter to shareholders, the arc of customer demands is long, but it bends ever upwards. It's the job of each company, especially its product team, to continue to be in tune with the topology of this "demand curve."

I see many companies spend time analyzing funnels and seeing who emerges out the bottom. As a company grows, though, and from the start, it's just as important to look at those who never make it through the funnel, or who jump out of it at the very top. If the product market fit gradient likely differs for each of your current and potential customer segments, and understanding how and why is a never-ending job.

When companies run focus groups on their products, they often show me the positive feedback. I'm almost invariably more interested in the folks who've registered negative feedback, though I sense many product teams find watching that material to be stomach-churning. Sometimes the feedback isn't useful in the moment; perhaps you have such strong product-market fit with a different cohort that it isn't useful. Still, it's never not a bit of a prick to the ego.

However, all honest negative feedback forms the basis of some asymptote in some customer segment, even if the constraint isn't constricting yet. Even if companies I meet with don't yet have an idea of how to deal with a problem, I'm always curious to see if they have a good explanation for what that problem is.

One important sidenote on this topic is that I'm often invited to give product feedback, more than I can find time for these days. When I'm doing so in person, some product teams can't help but jump in as soon as I raise any concerns, just to show they've already anticipated my objections.

I advise just listening all the way through the first time, to hear the why of someone's feedback, before cutting them off. You'll never be there in person with each customer to talk them out of their reasoning, your product or service has to do that work. The batting average of product people who try to explain to their customers why they're wrong is...not good. It's a sure way to put them off of giving you feedback in the future, too.

Even absent external feedback, it's possible to train yourself to spot the limits to your product. One approach I've taken when talking to companies who are trying to achieve initial or new product-market fit is to ask them why every person in the world doesn't use their product or service. If you ask yourself that, you'll come up with all sorts of clear answers, and if you keep walking that road you'll find the borders of your TAM taking on greater and greater definition.

[It's true that you also need the flip side, an almost irrational positivity, to be able to survive the difficult task of product development, or to be an entrepreneur, but selection bias is such that most such people start with a surplus of optimism.]

Lastly, though I hesitate to share this, it is possible to avoid invisible asymptotes through sheer genius of product intuition. I balk for the same reason I cringe when I meet CEO's in the valley who idolize Steve Jobs. In many ways, a product intuition that is consistently accurate across time is, like Steve Jobs, a unicorn. It's so rare an ability that to lean entirely on it is far more dangerous and high risk than blending it with a whole suite of more accessible strategies.

It's difficult for product people to hear this because there's something romantic and heroic about the Steve Jobs mythology of creation, brilliant ideas springing from the mind of the mad genius and inventor. However, just to read a biography of Jobs is to understand how rare a set of life experiences and choices shaped him into who he was. Despite that, we've spawned a whole bunch of CEO's who wear the same outfit every day and drive their design teams crazy with nitpick design feedback as if the outward trappings of the man were the essence of his skill. We vastly underestimate the path dependence of his particular style of product intuition.

Jobs' gift is so rare that it's likely even Apple hasn't been able to replace it. It's not a coincidence that the Apple products that frustrate me the most right now are all the ones with "Pro" in the name. The MacBook Pro, with its flawed keyboard and bizarre Touch Bar (I'm still using the old 13" MacBook Pro with the old keyboard, hoping beyond hope that Apple will come to its senses before it becomes obsolete). The Mac Pro, which took on the unfortunately apropos shape of a trash can in its last incarnation and whose replacement hasn't shipped in years (I'm still typing this at home on an ancient cheese grater Mac Pro tower and ended up building a PC tower to run VR and to do photo and video editing). Final Cut Pro, which I learned on in film editing school, and which got zapped in favor of Final Cut X just when FCP was starting to steal meaningful share in Hollywood from Avid. The iMac Pro, which isn't easily upgradable but great if you're a gazillionaire.

Pro customers are typically ones with the most clearly specified needs and workflows. Thus, their products are ones for whom listening to them articulate what they want is a reliable path to establishing and maintaining product-market fit. But that's not something Apple seems to enjoy doing, and so the mis-steps they've made on these lines are exactly the types of mistakes you'd expect of them.

[I was overjoyed to read that Apple's next Mac Pro is being built using extensive feedback from media professionals. It's disappointing that it won't arrive until 2019 now but at least Apple has descended from the ivory tower to talk to the actual future users. It's some of the best news out of Apple I've heard in forever.]

Live by intuition, die by it. It's not surprising that Snapchat, another company that lives by the product intuition of one person, stumbled with a recent redesign. That a company's strengths are its weaknesses is simply the result of tight adherence to methodology. Apple and Snapchat's deus ex machina style of handing down products also rid us of CD-ROM drives and produced the iPhone, AirPods, the camera-first messaging app, and the Story format, among many other breakthroughs which a product person could hang a career on.

Because products and services live in an increasingly dynamic world, especially those targeted at consumers, they aren't governed by the immutable, timeless truths of a field like mathematics. The reason I recommend a healthy mix of intuition informed by data and feedback is that most product people I know have a product view that is slower moving than the world itself. If they've achieved any measure of success, it's often because their view of some consumer need was the right one at the right time. Product-market fit as tautology. Selection bias in looking at these people might confuse some measure of luck with some enduring product intuition.

However, just as a VC might have gotten lucky once with some investment and be seen as a genius for life (and the returns to a single buff of a VC brand name is shockingly durable), just because a given person's product intuition might hit on the right moment at the right point in history to create a smash hit, it's rare that a single person's frame will move in lock step with that of the world. How many creatives are relevant for a lifetime?

This is one reason sustained competitive advantage is so difficult. In the long run, endogenous variance in the quality of product leadership in a company always seems to be in the negative direction. But perhaps we are too focused on management quality and not focused enough on exogenous factors. In "Divine Discontent: Disruption’s Antidote," Ben Thompson writes:

Bezos’s letter, though, reveals another advantage of focusing on customers: it makes it impossible to overshoot. When I wrote that piece five years ago, I was thinking of the opportunity provided by a focus on the user experience as if it were an asymptote: one could get ever closer to the ultimate user experience, but never achieve it:
 
stratechery-disruption-diagram-1.png
In fact, though, consumer expectations are not static: they are, as Bezos’ memorably states, “divinely discontent”. What is amazing today is table stakes tomorrow, and, perhaps surprisingly, that makes for a tremendous business opportunity: if your company is predicated on delivering the best possible experience for consumers, then your company will never achieve its goal.
 
stratechery-disruption-diagram-2.png
In the case of Amazon, that this unattainable and ever-changing objective is embedded in the company’s culture is, in conjunction with the company’s demonstrated ability to spin up new businesses on the profits of established ones, a sort of perpetual motion machine; I’m not sure that Amazon will beat Apple to $1 trillion, but they surely have the best shot at two.
 

Pattern recognition is the default operation mode of much of Silicon Valley and other fields, but it is almost always, by its very nature, backwards-looking. One can hardly blame most people for resorting to it because it's a way of minimizing blame, and the economic returns of the Valley are so amplified by the structural advantages of winners that even matching market beta makes for a comfortable living.

However, if consumer desires are shifting, it's always just a matter of time before pattern recognition leads to an invisible asymptote. One reason startups are often the tip of the spear for innovation in technology is that they can't rely on market beta to just roll along. Achieving product-market fit for them is an existential challenge, and they have no backup plans. Imagine an investor who has to achieve alpha to even survive.

Companies can stay nimble by turning over its product leaders, but as a product professional, staying relevant to the marketplace is a never-ending job, even if your own life is irreversible and linear. I find the best way to unmoor myself from my most strongly held product beliefs is to increase my inputs. Besides, the older I get, the more I've grown to enjoy that strange dance with the customer. Leading a partner in a dance may give you a feeling of control, but it's a world of difference from dancing by yourself.

One of my favorite Ben Thompson posts is "What Clayton Christensen Got Wrong" in which he built on Christensen's theory of disruption to note that low end disruption can be avoided if you can differentiate on user experience. It is difficult and perhaps even impossible to over-serve on that axis. Tesla came into the electric car market with a car that was way more expensive than internal combustion engine cars (this definitely wasn't low-end disruption), had shorter range, and required really slow charging at a time when very few public chargers existed yet.

However, Tesla got an interesting foothold because on another axis it really delivered. Yes, the range allowed for more commuting without having to charge twice a day, but more importantly, for the wealthy, it was a way to signal one's environmental consciousness in a package that was much, much sexier than the Prius, the previous electric car of choice of celebrities in LA. It will be hard for Tesla to continue to rely on that in the long run as the most critical dimension of user experience will likely evolve, but it's a good reminder that "user experience" is broad enough to encompass many things, some less measurable than others.

You can't overserve on user experience, Thompson argues; as a product person, I'd argue, in parallel, that it is difficult and likely impossible to understand your customer too deeply. Amazon's mission to the be the world's most customer-centric company is inherently a long-term strategy because it is a one with an infinite time scale and no asymptote to its slope.

In my experience, the most successful people I know are much more conscious of their own personal asymptotes at a much earlier age than others. They ruthlessly and expediently flush them out. One successful person I know determined in grade school that she'd never be a world-class tennis player or pianist. Another mentioned to me how, in their freshman year of college, they realized they'd never be the best mathematician in their own dorm, let alone in the world. Another knew a year into a job that he wouldn't be the best programmer at his company and so he switched over into management; he rose to become CEO.

By discovering their own limitations early, they are also quicker to discover vectors on which they're personally unbounded. Product development will always be a multi-dimensional problem, often frustratingly so, but the value of reducing that dimensionality often costs so little that it should be more widely employed.

This isn't to say a person needs to aspire to be the best at everything they do. I'm at peace with the fact that I'll likely always be a middling cook, that I won't win the Tour de France, and that I'm destined to be behind a camera and not in front of it. When it comes to business, however, and surviving in the ruthless Hobbesian jungle, where much more is winner-take-all than it once was, the idea that you can be whatever you want to be, or build whatever you want to build, is a sure path to a short, unhappy existence.

What I learned from a Taipei alley

I was in Taipei the past few weeks working on a documentary with friends. Because of a busy schedule, it wasn't like my usual travels abroad for fun, it felt more like a work trip. Still, even if I'd been there purely for vacation, I would've wanted to try a different mode of travel, one less focused on eating at nice restaurants or visiting notable tourist destinations and ticking them off the list like some big game hunter hoping to stuff and mount my quarry on Instagram.

Instead, inspired by my last visit to Italy, in which I spent many weeks wandering cities with knowledgeable locals, listening to them discuss their views on the past, present, and future of their country, culture, and institutions, I've been contemplating how to evolve my travel approach to gather more than just photos and memories.

I didn't have time to really put this fully into practice this trip. However, insight comes in odd ways. While filming in a cram school district of Taipei, I posted this photo of an alley to Instagram, wondering in my caption why American alleys did not contain such a density of food stalls and stands and restaurants.

In the comments on my photo, a friend asked me where all the trash in Taipei went? Indeed, I didn't see trash piled up on the sidewalks, or anywhere in public. In fact, much of the trip I couldn't even find a public trash can in which to throw out empty boba tea cups or the plastic wrap around whatever snack from 7-11 I'd just inhaled during a break in shooting. Why were there so few trash cans, and where was all the trash? That mystery led me down a rabbit hole.

I happened to interview some government officials for the documentary, and after those would wind down, or during breaks, I asked some of them to talk about trash collection in Taipei. They gave me an overview, the details of which I filled in online.

Like New York City, Taiwan once had trash piled up on sidewalks awaiting collection. As anyone who's ever wandered through New York City in the summer, huge heaps of trash on sidewalks, baking in the humid summer heat, are one of the city's least attractive features. It's not just the stench or the reduced sidewalk surface for pedestrians but the occasional rat nearly scurrying over one's feet that can induce regular surges of revulsion and horror.

New York City doesn't have many alleys. In contrast, if you've ever been to Chicago, you'll encounter many alleys between city buildings, and rather than pile trash on sidewalks, residents and businesses stash it in trash bins sitting in those alleys.

How is it that Chicago has alleys and New York does not?

According to Michael Martin, alley expert and professor of landscape architecture at Iowa State University, the “why alleys” question is easy to answer. You just have to go back to the late 1700s, decades before Chicago was founded. America was young, and had hardly touched any of its newest territories to the west.
 
“There's one thing you can do without having to explore all of it,” says Martin. “Lay a grid over that giant swath of land, and divide it up in ways that you can then take that land and you can sell it, you can deed it over to people.”
 
The federal government’s National Land Ordinance of 1785 imposed a massive grid over everything west of the Ohio River, dividing uncharted territory into square townships, each 36 square miles in size. Those townships were then sliced into progressively smaller sections, all the way down to the city block. 
 
“As you think about finer and finer scales of design, what's happening is those squares are being infilled and infilled,” says Martin. “The big grid was always the framework within which people developed things, and that leads to towns having square blocks, and ultimately the alley inside of that block.”    
 

Path dependence of development has a time dimension that impacts many aspects of the world, one of the things travel is good at teasing out. New York City was built earlier than Chicago. By the time it was time to develop Chicago, the grid design style had become prevalent.

The particulars came into play with the Illinois & Michigan Canal. In the 1820s, the U.S. Congress had granted the state of Illinois enough land to dig a canal to connect Lake Michigan and the Illinois River. The state planned to finance the construction by establishing towns along the canal and selling the land to developers.
 
The I&M Canal Commission hired surveyor James Thompson to lay out Chicago at the eastern end of the canal in 1830. To attract prospective land buyers, the General Assembly ordered that the new town of Chicago be “subdivided into town lots, streets, and alleys, as in their best judgment will best promote the interest of the said canal fund.”
 

In the American consciousness and pop culture, the alley is a place of danger and grime. It's where Bruce Wayne's parents were shot and Batman birthed, a place of drug deals, prostitution, gang fights, and dumpsters. This squalid reputation may trace back to the functional roots of the alley in America.

The city [Chicago] was a filthy, stinky, disease-ridden place in those days. Rear service lanes were essential for collecting trash, delivering coal, and stowing human waste — basically, keeping anything unpleasant away from living quarters.
 
“This was one of the reason why alleys have this dark and nasty reputation,” says Martin. “They were very much the grimy service part of daily life. It wasn't expected that this would be a well-maintained landscape; it was kind of a landscape of raw utility.”
 

Despite that, alleys do offer Chicago a place to stow trash that in NYC would pile up on sidewalks. However, Taipei has alleys that don't house trash dumpsters and are an improvement, to my mind, over Chicago alleys in their contribution to civic life. How does Taipei manage it?

Once, like New York City, Taipei had trash piled up in public, the stench of trash stewing in the tropical weather permeating the city and attracting rats. In an effort to remove this highly visible trapping of third world status, the government made a concerted effort starting in the mid-80's to overhaul their trash collection policies.

Für Elise” is one of the world’s most widely-recognized pieces of music. The Beethoven melody has been played by pianists the world over, and its near-universal recognition has been used to attract customers for companies as big as McDonald’s and as small as your local ice-cream truck. But if you hear the song playing on the streets of Taiwan, accompanied by the low grumble of an engine, the only ice-cream you’ll find if you follow the tune will be the soupy remains of a neighbor’s Häagen-Dazs. In Taiwan, “Für Elise” means it is time to take out your trash. Directly out to the truck. Yourself.
 
In the capital city of Taipei, trucks play two different songs along their garbage-routes (the other one is “A Maiden’s Prayer” by composer Tekla Bądarzewska-Baranowska).
 
Five nights a week, Taipei residents head to out to designated street corners, where the yellow garbage trucks will stop for a few minutes (and turn off their music), so that people toss their bags of trash in themselves.
 

Having shot a documentary outdoors for almost two weeks in Taipei, I'm by now well-acquainted with these garbage trucks. It's a nightmare for sound recording as the musical chimes from the trucks makes it very difficult to edit around footage in post.

However, seeing citizens lining the sidewalks, official government required blue trash bags in hand, was a remarkable vision of civic cooperation. The idea that trash collection would occur multiple times a day, five or six times a week, is stunning to this American. In effect, Taiwan moved to a just-in-time trash collection system. As noted in this article:

This ‘trash-doesn’t-touch-the-ground’ system makes each person responsible for his or her personal consumption. Every plastic fork, every bottled beverage, and every food scrap needs to be accounted for by its consumer. The implementation of a few clever policies encourages this new relationship with trash.
 
It’s compulsory for the people of Taiwan to use a special blue ‘City of Taipei’ garbage bag to dispose of general waste. They’re available at most corner stores and come in different sizes, ranging from 3 to 120 liters. On the other hand, recycling is free and can be brought to the truck in any kind of bag.
 
This encourages people to recycle more and produce less trash.
 

What did this have to do with the paucity of public trash receptacles which also forced me to carry plastic wrappers and bottles in my pocket as we wandered around the city? City officials discovered that citizens had been skirting recycling mandates by dumping things in public trash bins. To increase recycling compliance, the government removed public trash receptacles, conducted occasional audits of trash and recycling when the trucks came by, and started posting videos of and fining violators.

All together, these policies have been remarkably effective.

[Taiwan was]  producing 3,296 tonnes per day and recycling only 5% of it. Today, they have reduced that number by more than 2/3, of which they recycle an impressive 55%.
 

The difference in philosophy and ownership of trash collection between the United States and Taiwan is striking.

The difference between Taiwan and other nations is the way waste management sits in the public’s consciousness. In the US, waste management is run by private companies. Companies place the emphasis on quality of service, aiming to reduce the burden on the consumer.
 
People don’t have to think about the amount of trash they produce – once it’s in the can, it’s no longer their responsibility. Garbage trucks come in the dead hour of the night or during office hours, to be as inconspicuous as possible.
 

For some problems, achieving a breakthrough requires a holistic solution, with interlinked policies as Taiwan implemented to avoid any Cobra effects.

It depresses me to think of San Francisco's reactionary, incrementalist governance in comparison. The MTA recently voted unanimously to cap the number of total electric scooters in the city to 1,250 for the first year of testing. That's among five different rental companies.

I don't mind that government agencies implement codes and regulations; some policies save lives, like earthquake and fire building codes. But the incrementalist approach likely dooms the city to a series of local maximums at best, and at worst locks out all the dynamic improvements that characterize the most vibrant systems.

Electric scooters might be a wonderful addition to the city's transportation options, but it's something that needs to be tested at scale because it's a solution that depends on scale for a good customer experience. I've tried to take electric scooters a few times, and either the nearest one is too far away, or the one I walk up to has a dead battery. If you limit the number of scooters during a test you might as well just ban them.

A much more vibrant and livable San Francisco likely involves something like 25-50% fewer cars, sidewalks 50% wider, buildings 50% taller, twice the population density, and 25X the number of electric scooters, just to throw out some back of the envelope guesses of enough magnitude to alter one's conception of the city in a significant way. But no incrementalist approach will get the city there.

The inefficiency of large, infrequent transactions

In a conversation with Matt Levine, Tyler Cowen asks:

COWEN: Like you, I’m mostly an efficient markets guy, but when I look at initial public offerings I’m very baffled because investment banks take such a huge cut.
 
If you needed to argue, “Well, they need the cut because they talk up the security, and in the absence of their efforts, no one would be interested, and it’s worth it,” maybe that argument works. But it seems somewhat to stand in tension with an efficient markets hypothesis, which suggests the thing will find its appropriate level without any particular investor having to talk it up.
 
Furthermore, attempts to get around the current mainstream system of IPOs have not always been successful. Auctions have been tried. Israel has tried other methods. Spotify is giving it a go. We’ll get further data, but they’re not obviously doing better.
 
How do you reconcile IPOs in their current form continuing, the investment banks taking such a huge cut, and some version of efficient markets hypothesis actually making sense? Do you see what I’m asking?
 

I wasn't at Amazon for its IPO, but I did work on a huge convertible debt offering there. At the time it was the largest ever done. After the transaction had cleared, I received a box at work from Morgan Stanley, who'd been our banker on the deal. Inside was a Tumi carry-on bag, personalized with Amazon and Morgan Stanley logos. Everyone on our side who worked on the deal received one. My guess was the bag retailed for $500 or so without the personalization.

It's always an ambivalent feeling, receiving such a pricey gift from a business partner after a deal. I've received similar customized luggage from law firms after their assistance on something. It feels as if you bought yourself something you didn't want. I generally believe in efficient markets, but I believe even more strongly that law firms and bankers don't do anything out of affectionate generosity. Call it the efficient business transaction hypothesis, in which you always pay for every bit of service rendered. There's a reason you don't receive a Tumi bag from your dry cleaner after laundering a big batch of shirts.

So, as with Cowen, I've long puzzled at the exorbitant take on the part of bankers in deals, regardless of the volume of work done.

Levine answers:

LEVINE: How do I reconcile? One version of efficient markets is that, in the absence of news, the price yesterday is going to be the price today, or whatever. There’s some sort of continuity of prices.
 
The IPO is a huge discontinuity. You don’t have a price and then you have a price. If your notion of efficient markets is a straight line of the price not moving very much or of the price instantly incorporating information, it’s not unintuitive that you’d have a big squiggle at the start, that you wouldn’t really know what the price is for three days, and then you would.
 
I don’t think it’s unusual that the first trade of a stock would not be the price that it settles to in a week, but then, the second week would be pretty close to the first week.
 

A good answer, but the word "discontinuity" hints at another aspect of this type of transaction which hints at why an IPO may not exhibit aspects of an efficient market.

I long wondered the same of the real estate market, another space in which real estate agents have been able to maintain their 6% rake despite the advent of the internet. It's a bit of a puzzle considering how many other markets the internet has turned so efficient that almost all the profits went out of them.

There's a class of transactions which retain abnormally large margins which share several qualities.

  • They are rare, or infrequent transactions for one side, usually the buyer. Many people may only conduct one of these in their lifetime.
  • They are really large relative to most transactions in a person's lifetime, anomalously so.
  • They don't have well-known price anchors, often because the service is good is unique, making exact comps squishy.
  • They are transactions which have some symbolic or mystical value which can justify overspending because how do you put a price on magic?
  • They are time sensitive.

Let's take those in order. The low frequency of such transactions weighs in favor of the seller, not the buyer, because the buyer has no experience. IPOs, housing purchases, weddings. The experience asymmetry is really information asymmetry. One should always be skeptical of playing any game where your opponent has to explain all the rules to you. The three card monte and other cons always begin with the con man explaining the game to you, no?

The anomalous size of the transaction works against you in several ways. One, when so much money is involved, one tends to experience inflation on all fronts. If you're buying a condo that costs a million dollars, or, in the case of San Francisco, a lot more than that, what's another couple hundred dollars in fees here, a few thousand there? In the scheme of things, 6% to your agent doesn't even cross the mind after you've been beaten out on several dream condos in a row by a suitcase of cash from a Chinese buyer who never even showed up. Relative to the transaction size, it's nothing. Human cognitive deficiencies on this front are well-studied.

The lack of price anchors doesn't help. What should a wedding dress cost? You can ask your friends, but, to crib from the Marines, "This is my wedding dress. There are many like it, but this one is mine. It is my life."

Buying cars is also a rare transaction, but it's unlikely you're buying a car model that's never been purchased before. As soon as the internet revealed dealer pricing, it was easy to just call a string of dealers around town and offer to pay $500 over that, nothing more.

The special nature of such transactions supports a "je ne sais quoi" premium. Are you really going to skimp on your IPO, or pinch pennies when it comes to your wedding? I know brides who would sooner cut dinner from the wedding festivities than skimp on their wedding dress. If the event has symbolic value, then almost any price can be justified to oneself. Different cultures support different such mystical price premiums. In the United States, people will spend to no end on their dogs, for example. It's the same for babies or children in many cultures. Are you really going to try to save a hundred dollars or so on a stroller which will transport your precious child for several of their formative years, or not pay the $25,000 tuition for your potentially genius of a child to attend the coveted private school every one is trying to get into?

The time-bounded nature of such transactions just prevents you, as the buyer, from using a long time horizon for leverage. Sellers, of course, will use the time bound as a cudgel in every way possible. If you don't nibble they have many more transactions to come, but you as the buyer have no such luck. The wedding invites have been sent, your investors are eagerly awaiting your IPO, you need to secure housing before your current lease runs out.

The internet has, in many ways, ushered in an age in which old axioms of supply and demand economics aren't always applicable, or which make edge cases commonplace. Infinite supply, zero marginal transaction costs (especially in production and distribution), these are suddenly prevalent. It's almost nostalgic, therefore, to ponder the economics of infrequent transactions, or of markets where supply is fixed (the limited edition sneaker market, for example, or the Bay Area housing market).

The high margins prevalent in large, infrequent transactions suggest that businesses might create some moats simply by replicating some of the qualities of such transactions, even if the underlying businesses don't consist of those. What is subscription pricing but a way of grouping many, frequent transactions into many infrequent transactions where it's difficult to determine the unit cost of all the components of the bundle? I suspect half the reason for the phenomenon in which tech oscillates between bundling and unbundling is to find the efficient size of the bundle that the consumer will bear. We won't all have dozens of Patreon accounts that we support in the future, but neither will we pay $300 a month for some mega video streaming bundle that includes everything under the sun.

Every transaction is a moment for a buyer to reconsider whether it's all worthwhile. At some point, I expect many newspaper will band together to offer some bundled subscriptions. Magazines already have tried this but the very concept of a magazine, and the typical frequency of issues (monthly) is difficult to construct a high value bundle around as compared to newspapers.

I also suspect that the ride-sharing services like Uber and Lyft will continue to experiment with some sort of monthly fee with unlimited rides within reason (perhaps with mileage overage payments). Uber has already experimented with offering pre-payments for a bundle of fixed price rides for a month, and I expect that's just the first step towards some sort of lock-in car-as-a-service subscription pricing. It's exhausting to duke it out with competitors one ride at a time, and it trains buyers to shop for the best price on each ride, something that's easier than ever given that both services' apps allow you to enter your destination to see the price ahead of booking a car.

Let's suppose that consumers do possess some limit to the number of transactions they're willing to put up, some finite cognitive load for payments. If so, then any seller must consider the number of other subscriptions in the marketplace when understanding how well their own bundle will do. And in that case, we should start to see more bundles of bundles. In the tweet above I suggest a few, there are likely many others.

The problem with creating bundles of bundles is divvying up the credit. It's unlikely all components of the bundle contribute equally, so the highest value component is typically hesitant to join in. However, in the digital age, assigning credit is much simpler. So, just as ESPN earns much higher carriage fees in the cable bundle than, say, Comedy Central, can be done with exact usage figures in real time.

The funniest example of the efficiency of bundling (well, it is to me since I don't have kids) is the division of childcare. When I'm around parents, it's somewhat striking how much of a constant low-level tension arises from splitting up such duties. Whose turn is it to change a diaper, or to go hold a crying baby? With the exception of the wealthy who can afford full-time childcare help, such tasks are among the most frequently occurring transactions in adult life. Each is a moment of negotiation, and thus an opportunity for friction.

Thus, parents come up with long-term divisions that reduce the number of such transactions. Sometimes it's an agreement that the dad handles all dishes and diaper changes while the mom does all the feeding and crying. Parents also will come up with bundles which they trade, to reduce the overall number of negotiations. The husband get to go on a guys golf trip for a week, but later that year, the mother gets a girls trip to Palm Springs.

Sometimes efficiency is just household equilibrium, and you can't put a price on that type of harmony.

Catch up

It has been some time since I posted here. Outside of lots of meetings around the country and some trips with family and friends, a few creative projects have stolen the lion's share of my free time.

While I won't publish some Medium screed on how spending less time on social media transformed my life, it is an unavoidable truth that one's free time is a zero sum game. For infovores, Twitter is a bit like heroin, and for all the other gaps in one's time, other social media apps are like some Cerebro-like viscous membrane that gives off a mild contact high from the vibrations of ambient social intimacy.

As presently constructed, though, all these apps are certainly well into the point of diminishing returns for me, and so less time spent there, redirected offline, has been good for my general productivity and well-being. I'm not certain, but it seems that's it not a question of mix as it is of finding the optimal frequency for all the various activities in my life. To take one example, almost certainly I see huge returns to shifting conversations with folks on Twitter offline.

Some of that time has been spent continuing to wend my way through Emily Wilson's brilliant new translation of The Odyssey. What's fascinating is how it remains resonant with modern times, speaking to its universality. Ironically, what it reminded me of, perhaps because the topic was still top of mind, was social media.

Take the famous episode in which Odysseus and his men sail past the Sirens and then between Scylla and Charybdis. What surprised me was how short the entire episode is, only occupying a few pages in Book 12, titled "Difficult Choices."

The goddess Circe gives Odysseus a preview of what he and his men are about to encounter.

First you will reach the Sirens, who bewitch
all passersby. If anyone goes near them
in ignorance, and listens to their voices,
that man will never travel to his home,
and never make his wife and children happy
to have him back with them again.
 

"If anyone goes near them in ignorance, and listens to their voices..." But this is what happens on social media all the time! Never have we dilettantes in just about every subject had such a forum to lord our "expertise" over others. Circe warned us long ago what would happen, how insufferable we'd all be to our loved ones.

The song of the Sirens is irresistible, and Circe knows it, so she advises Odysseus thus:

...Around about them lie
great heaps of men, flesh rotting from their bones,
their skin all shriveled up. Use wax to plug
your sailors’ ears as you row past, so they
are deaf to them. But if you wish to hear them,
your men must fasten you to your ship’s mast
by hand and foot, straight upright, with tight ropes.
So bound, you can enjoy the Sirens’ song.
 

It's as if Circe is speaking to my irresistible urge to open and read Twitter at the slightest hint of boredom, warning me of the great heaps of men, flesh rotting from their bones, who'd done so before me. As for her firm guidance that Odysseus be bound to a mast? That's just the antecedent to today's "Never tweet."

Thus, in my moments of weakness, I open Twitter but bind myself to a metaphoric ship's mast so I cannot reply to the trolls, as tempting as it is to join the chorus of people letting their outrage loose. Some days it feels to me that half my timeline is just people posting witty and savage rejoinders to Tomi Lahren or Trump or Dana Loesch and so on. Twitter should just move all of that to a separate tab, it has become a sort of performance art.

Alexis Madrigal wrote of how he turned off retweets in his Twitter timeline and it improved for him.

Retweets make up more than a quarter of all tweets. When they disappeared, my feed had less punch-the-button outrage. Fewer mean screenshots of somebody saying precisely the wrong thing. Less repetition of big, big news. Fewer memes I’d already seen a hundred times. Less breathlessness. And more of what the people I follow were actually thinking about, reading, and doing. It’s still not perfect, but it’s much better.
 

Farhad Manjoo wrote that for two months he got his news only from print.

It has been life changing. Turning off the buzzing breaking-news machine I carry in my pocket was like unshackling myself from a monster who had me on speed dial, always ready to break into my day with half-baked bulletins.
 
Now I am not just less anxious and less addicted to the news, I am more widely informed (though there are some blind spots). And I’m embarrassed about how much free time I have — in two months, I managed to read half a dozen books, took up pottery and (I think) became a more attentive husband and father.
 

Is this much different than Circe urging Odysseus to plug his mens' ears with wax? Homer got there first. I am weak so I have not gone full cold turkey on social media. Instead, I am still occasionally there, tied to the mast, flailing against self-administered bonds, listening to the Siren song. May the gods help me.

[Wilson herself recently posted a series of tweets observing something else intriguing about the Sirens, the idea that they were some sexy seductresses. Reading Wilson's translation, you realize there is no mention of the Sirens' appearances. The seduction is all in their song, and that makes them an even more appropriate metaphor for social media.] 

After the Sirens, Odysseus and his men meet even more formidable adversaries. Circe foretells of an inescapable passage between Scylla and Charybdis, the original rock and a hard place. There, she says, it's best to pick the lesser of two evils and to sail closer to Scylla, a twelve-legged six-headed monster who will eat six of his men. It sounds terrible, but the alternative is allowing Charybdis to swallow his entire ship. For my money, it's the most famous leadership parable about minimizing one's losses.

Odysseus, upon hearing this, pleads to no avail.

I answered, ‘Goddess, please,
tell me the truth: is there no other way?
Or can I somehow circumvent Charybdis
and stop that Scylla when she tries to kill
my men?’
 
The goddess answered, ‘No, you fool!
Your mind is still obsessed with deeds of war.
But now you must surrender to the gods.
She is not mortal. She is deathless evil,
terrible, wild and cruel. You cannot fight her.
The best solution and the only way
is flight.
 

Is Circe the best life coach, or the best life coach? She's the original Tony Robbins.

Can you read social media and emerge with your senses and emotional well-being intact? "No you fool!" We may not be able to avoid it, but at least we can heed Circe's words. "The best solution and the only way is flight."

Odysseus and his men proceed as Circe warns, and, tied to the mast, our titular hero hears the song of the Sirens.

‘Odysseus! Come here! You are well-known
from many stories! Glory of the Greeks!
Now stop your ship and listen to our voices.
All those who pass this way hear honeyed song,
poured from our mouths. The music brings them joy,
and they go on their way with greater knowledge,
since we know everything the Greeks and Trojans
suffered in Troy, by gods’ will; and we know
whatever happens anywhere on earth.’


Their song was so melodious, I longed
to listen more. I told my men to free me.
I scowled at them, but they kept rowing on.
 

What is this but the siren song of Twitter and Facebook and Instagram and all the other addictive apps on our phones, luring us with the comforting and self-affirming dopamine hits of likes and followers and readers. "...they go on their way with great knowledge since we know everything...and we know whatever happens anywhere on earth" is nothing if not the tagline for Twitter written in another age (copyright Homer).

"Their song was so melodious, I longed to listen more." My Siren is my iPhone, always within arms reach, always with the promise of "greater knowledge." Have I been disciplined and avoided its call? Not always. And like Odysseus, who does end up losing six men to Scylla, I've lost a few chunks of flesh along the way.

I do have a few long posts incubating, however, which I hope to finish soon. In the meantime, a bit of catch up.

***

I was lucky enough to be invited onto two podcasts, both of which were recorded in person during my recent trip to New York City for meetings and to visit family. The first was Khe Hy's Rad Awakenings podcast. The second was the Internet History Podcast hosted by Brian McCullough. I didn't have a book or anything to promote, so they're both a bit free-ranging, as I am here. Check them out if you're interested and let me know what you think.

It's fascinating to watch the explosion in podcasts, and it's somewhat apparent when you see how easy it is to record one with just a computer and two small microphones. Given the economics of text are so lousy, and given how challenging it is to produce compelling video, the most lucrative vector for media companies is not a pivot to video but a pivot to podcasting. Every day it seems a media company is releasing a new daily news podcast recap.

In time, the marginal return will decline, but perhaps not before we see a second wave of growth in podcasting's total addressable market (TAM) from improved discovery (the first explosion in podcasting TAM was, of course, the rise of the smartphone, which opened up a ton of podcast surface area in one's daily schedule, most notably in commutes).

***

I kid not, one of the most fascinating videos I've watched since I last posted here was this episode of Trashcast discussing Logan Paul. For some reason the original version of this video was pulled by YouTube so as of right now, this newly uploaded version has all of...63 views. It taught me more about the Logan Paul phenomenon than anything else I've read or watched, and its presentation is of a style that is extremely meta, like a young person's Vox explainer.

The temptation, when something like the Logan Paul scandal drops, is to post "Who the f*** is [Logan Paul]?" on Twitter or Facebook. I saw probably a dozen or more such posts, and while I resisted the urge, I myself had no idea who Logan Paul was until he was the latest person to take his turn in the public pillory.

I'm less interested in Logan Paul than I am in all the superstar vloggers who can turn out audiences of tens of thousands young kids everywhere they go. Their particular pull to children of that age, the visual grammar of their content, the syntax of their speech, their distribution frequency, it's all quite instructive.

One can read near-future sci-fi, or one can just spend some time with some of today's youth, who already live in the near-future. The latter is much more vivid. I spent several hours watching my nephews play Fortnite and message on Snapchat and surf on Instagram while in NYC recently, and it was as if I'd crossed over through some alien border into a cultural Shimmer. As with Natalie Portman, every one of my visits there leaves me altered in some inexorable ways.

***

One of my recent (okay, not so recent) posts was on the shift in entertainment from the shift to infinite content supply. I opened with a brief discussion of Will Smith.

A few readers sent me a link to this excerpt from Ben Fritz's new book The Big Picture: The Fight For the Future of Movies. The excerpt is about the rise and fall of the A-List movie stars Will Smith and Adam Sandler during Sony's motion picture heyday in the 2000's.

Of Sony's top 50 movies from 2000 to 2016, more than two-thirds were "star vehicles," in which the talent involved was as big as or bigger than the movie title or the franchise. More than one-third came from just two people: Will Smith and Adam Sandler. Movies they starred in or produced grossed $3.7 billion from 2000 to 2015, generating 20 percent of Sony Pictures' domestic gross and 23 percent of its profits. No other studio was as reliant on just two actors. Their rise and fall illustrate what has happened to movie stars in Hollywood.
 
...
 
Sony paid both stars handsomely for their consistent success: $20 million against 20 percent of the gross receipts, whichever was higher, was their standard. They also received as much as $5 million against 5 percent for their production companies, where they employed family and friends. Sony also provided Overbrook and Sandler's Happy Madison with a generous overhead to cover expenses — worth about $4 million per year. To top it off, Sandler and Smith enjoyed the perks of the luxe studio life. Flights on a corporate jet were common. On occasion, Smith's entourage necessitated the use of two jets for travel to premieres. Knowing that Sandler was a huge sports fan, Sony regularly sent him and his pals to the Super Bowl to do publicity. Back at the Sony lot, the basketball court was renamed Happy Madison Square Garden in the star's honor. When anybody questioned the endless indulgence given to Sandler and Smith, Sony executives had a standard answer: "Will and Adam bought our houses."
 

I wrote:

I'm wary of all conclusions drawn about media in the scarcity age, including the idea that people went to see movies because of movie stars. It's not that Will Smith isn't charismatic. He is. But I suspect Will Smith was in a lot of hits in the age of scarcity in large part because there weren't a lot of other entertainment options vying for people's attention when Independence Day or something of its ilk came out, like clockwork, to launch the summer blockbuster season.
 
The same goes for the general idea that any one star was ever the chief engine for a film's box office. If the idea that people go see a movie just to see any one star was never actually true, we can stop holding the modern generation of movie stars to an impossible standard.
 

Of course, this is a counterfactual, so hard to establish conclusively. Perhaps, in the age of scarcity, A-List stars really did exist. Regardless, that age has passed, and banking on its continued viability is a shaky proposition at best.

A further thought, which I first made in a presentation at a Greylock Product Summit a few years back, is that the rising supply of content means that exceeding the noise floor favors a different type of film or television property. In the heyday of the three and eventually four major networks, the golden age of broadcast television, the dream show was one with broad appeal. The economics of television were heavily dependent on advertising revenue, and the larger the audience, the larger the revenue. A show like The Cosby Show or The Beverly Hillbillies, that attracted a broad audience through a sort of non-offensive if somewhat bland sensibility was the dream.

Again, though, it's important to recall how scarce entertainment options were in that age relative to today's cornucopia. It isn't just the economics of carriage fees and pay TV that helped drive the rise of much more distinctive and niche appeal shows like Mad Men; it's what you'd expect when the overall information noise floor rises. The risk of trying to make a broad appeal show is that it is mildly appealing to many people but not strongly appealing to any audience segment, and that is a losing strategy if the noise floor is so high that only high appeal shows can poke their head above it.

Is it any surprise that two of the most successful showrunners in recent history are Shonda Rhimes and Ryan Murphy? Watch any of their programs and, whether you like them or not, you won't fault them for pulling their punches. Scandal, How to Get Away With Murder, American Horror Story, Nip/Tuck, Glee, The People Vs. O.J. Simpson, these are programs that are engineered to mash people's buttons.

Two of the bigger hits of recent memory that aren't from either of those two showrunners are  Empire and This is Us. The former was, like many of Rhimes and Murphy's shows, crazy. Double crosses, murders, affairs, all of it. Cray cray. As for This is Us, I watched two episodes with my sister-in-law while in NYC, and while it might seem to fit the template of a more classic, broad appeal broadcast network show, it is bonkers in its own way. Its genre is melodrama, and the episode design is a tear-jerker in every episode. Every one. No exceptions. If you are a writer on that show and your episode doesn't the audience cry they fire you and then everyone has a good cry over it.

In a world of infinite content, the ideal bundle, then, isn't a basket of broadly appealing programs, something that may be impossible to engineer anymore. Instead, it's a bundle of shows with very strong niche appeal to particular but different audience segments. This, as many of you will note, is not some new concept. The conditions have just made it a more critical one.

In the Hollywood Reporter, Marc Bernardin observes the success of films like Wonder Woman, Get Out, Black Panther, and Coco, and notes:

No, the reason we're in the midst of a halcyon age of representational storytelling that's resonating on a historic scale is that a far more diverse pool of storytellers — black filmmakers, female filmmakers, Asian filmmakers — are getting empowered to tell their stories their way with all the resources usually reserved for white, male creatives. Black Panther isn't just the story of a handsome prince taking the throne of a fictional, advanced African nation, it's also the story of a filmmaker reckoning with the disconnect that lives in the hyphen between "African" and "American." It's about a man who grew up around women of strength and grace and power who didn't think twice about populating both his art and his set with those same kinds of women. It's about a kid from Oakland dreaming dreams that the world told him he couldn't.
 
Similarly, Thor: Ragnarok would never have been both a balls-out buddy comedy with a perfectly timed anus joke and a trenchant examination of the paved-over sins of colonial expansion without the half-Maori New Zealander Taika Waititi at the helm. And we have proof positive of how Jenkins' centering of Diana in Wonder Woman is different from Zack Snyder's treatment of the same character in Justice League: More openness, innocence and resolve … fewer gratuitous shots of Gal Gadot's ass.
 
And there's no one who could've conceived of Get Out but Peele, who spent years exploring the ways race and genre collide on TV's Key & Peele, is a student of horror and has definitely found himself navigating the frothy waters of meeting a white girlfriend's parents for the first time.
 
The way forward isn't simply to decide to greenlight stories about diverse people. It's to cultivate a generation of writers, directors and producers who see the world through their own unique lens and then bring that perspective to bear. If Marvel didn't have someone like Nate Moore in its producer ranks, someone who knew who T'Challa was and what he could mean, you'd never get a Black Panther. If Pixar didn't elevate story artist Adrian Molina to co-director and co-writer, Coco might've seemed more like a Day of the Dead theme park ride than a haunting, heartbreaking exaltation of Dia de los Muertos.
 
What audiences are responding to, in every movie that's popped in the past year, is a sense of truth. Just as we can tell, somehow, when CG is spackled on a little too heavily, we can sense when something feels inauthentic. We can tell the difference between 12 Years a Slave and Amistad, between The Joy Luck Club and The Last Samurai, between Selma and Mississippi Burning. One of them feels true — and truth, ultimately, is what makes something universal.
 

I believe in the power of film as a medium, and so it's no surprise that I believe in the underrated power of representation. It's not underrated by those of us who've never seen ourselves on screen, but I recall talking to some white men about Wonder Woman, and they remarked how they didn't see what the fuss was about. I couldn't help but think of the group of women I saw Wonder Woman with; half of them left the theater in tears, the experience of watching a woman on screen was so viscerally moving. I think of the Mexican family seated next to me at a screening of Coco, who spent half the film sobbing audibly.

The only Asian men, let alone Chinese men, I saw on screen growing up were Mickey Rooney's bucktoothed caricature of a Japanese man in Breakfast at Tiffany's and Long Duck Dong in Sixteen Candles. If you've ever wondered why Bruce Lee is a near deity to Chinese men, it's simply that he was the only powerful representation of themselves they ever saw in American entertainment.

The archetype of almost every hero and leader I saw growing up was a white man, and it continues today, where the leadership team of almost every company in Silicon Valley is dominated by white men. Someone asked me once whether I could name a single Chinese CEO of a tech company who had been promoted into the role, rather than having founded the company. I couldn't think of one.

It's a blessing to me, then, that the age of infinite content has made culturally specific and truthful representation good business practice for Hollywood. I'd prefer we arrived by some more progressive route, but, as Russian writer Viktor Pelevin has noted, the chief protagonist of pop culture today is a briefcase of money. We've seen many a film with a whitewashed cast bomb recently, and it doesn't strike me as a coincidence. When we have an near infinite supply of content at our disposal, no one needs to settle for the bland, the milquetoast, the emotionally false.

***

In that same post about the shifting dynamics of entertainment in the age of abundance, I wrote about the Instagram account House of Highlights. Fast Company cited it in an article about House of Highlights.

The past week, I've been watching carefully to see which outlet picks up March Madness buzzer-beaters the quickest, and it is, more often than not, House of Highlights on which I see the first video replay.

Social networks go through several phases of evolution on their path to maturity. First, they need to get people to use it even when the graph is sparse. This is the single-player value problem. If they solve that, then the next efficient evolution is some sort of feed, usually populated by all content from people you follow. It's the easiest way to increase the surface area for each user, and it's the easiest way to amplify your service's network effects. The only way to increase a user's frequency of usage is to increase the volume of content to serve them, and aggregating content from all the people you follow is a simple way to personalize the feed, to create value for the lurkers who want to watch but not post, and to send addictive feedback signals to the creators of that content. It's the tried and true social network positive feedback loop.

Then, at some point, if the network is successful enough, the problem becomes one of too much content. This is typically when networks move from a chronological, exhaustive feed to an algorithmic feed on some relevance dimension. It's typically when some segment of early adopters complains about the loss of said chronological feed.

The algorithmic feed is social networks' counterpart to Inbox Zero. Social networks realized that an "inbox zero" solution to social network overload would never work; too few people would do the necessary work. Arguably, Inbox Zero has about the same adoption issue with regards to email.

GMail has a version of the algorithmic email inbox, it's the Important email box, and various other programs have tried to filter out unimportant emails from the inbox using a variety of strategies, but I'd be interested to see software go even a step further and prescribe more drastic measures for solving the signal-to-noise problem of that medium. If you're rich and powerful that solution is a stern administrative assistant but we've yet to scale that with AI. The closest I've come is my GMail's spam filter. I went in there recently and found a bunch of email I had actually subscribed to, but while the false positives were mildly annoying, I couldn't argue my life was harmed in any meaningful way. If you're waiting to hear from me, you're probably in my GMail spam folder, for some reason it's become increasingly aggressive.

Content services tend to try their own filtering solutions, tailored to their medium. Video streaming services use some mix of personalized and generic categorical recommendations to populate their interfaces, while news sites lean towards some matrix of chronology and importance overlaid with light categorization. Common to all of these is an acknowledgment that users don't tend to browse sideways through interfaces when exploring through the limited screen real estate of the smartphone screen, so maximizing relevance on a single infinitely scrolling interface window is the most profitable vector. Is it any surprise every video service seems to have autoplay turned on by default now?

This is all a roundabout way to say that House of Highlights will someday soon hit bump against the the limitations of the single news feed, despite all of that interface's advantages in aggregating eyeballs for content consumption and advertising on a smartphone screen. Like all providers, House of Highlights depends on the algorithm to push its content to people at the right time, and for those users to pull the content. I suspect that the next frontier for all these large and mature social networks is additional levels of in-feed structure.

We've already seen glimpses. The idea of stories, which made its first appearance in Instagram, solve the supply-side problem of social media. That is, in an exhaustive chronological feed, many users are shy about flooding the feed. This caps content supply.

Stories, by putting the onus on the viewer to pull the story, unlocks a flood of content. Post frequently, guilt-free! I'd guess that the demand on that content is limited, but paired with the regular algorithmic or chronological feed, you essentially create two marketplaces of content in one interface.

Instagram now allows multiple photos per post, another example of added structure. But for now, the algorithms largely restrict themselves to either choosing to display a piece of content or not. It's all candidate selection. 

I suspect the next breakthrough for all our most used mobile apps, all of whom have achieved massive scale, from Facebook to Instagram to Twitter to YouTube to Snapchat and so on, will be an evolution of the algorithm beyond pure content selection, and an evolution of the presentation of said content from into a broader array of templates.

It's a topic for another post.

***

Justin Fox of Bloomberg posted a piece related to my post and its discussion of brittle narratives. He notes that some folks have tried to address the problem of brittle narratives when it comes to sports. As an example, he links a video from Ben Falk's Cleaning the Glass, a popular new subscription service for basketball junkies from a former NBA front office staffer.

Writes Fox:

As with my experience in reading about and then watching UVA's Pack Line, it is also a reminder that there are narratives to sports events that go deeper than what can be plausibly condensed into standard highlight reels, and that casual viewers can be taught to appreciate them. I really am not much of a basketball fan, but Falk's explainer makes me want to observe James in action over extended periods to see if I can detect other such episodes of quiet brilliance. I probably won't; I've got way too many other things going on to add regular watching of the Cleveland Cavaliers to my schedule. But I am at least thinking about it.
 
In soccer, the sport I watch most on TV except in years when the Oakland A's are good, the highlight moments are so rare that you really can't appreciate the games unless you have some understanding (mine is admittedly pretty rudimentary and inarticulate) of the dramas playing out on the field between the scores and near-misses. In other sports, there have always been a few announcers who capably weave these background narratives into their work. I know Tim McCarver was driving most viewers crazy by the time he retired from calling baseball games in 2013, but I can remember him adding layer after layer to the game-watching experience in earlier years. From what I hear (I really don't watch much football), former Cowboys quarterback Tony Romo did that in his first go-round as an NFL analyst for CBS last season.
 
Right now, basketball seems to be generating the most such explanation, though. Maybe that's just because it's basketball season! But I also think there's a happy convergence of the sport's usually-in-motion nature; the emergence of a group of expert, articulate superfans that probably began with the rise of Bill Simmons; the NBA's willingness to accommodate superfans who know how to splice video; and the presence of stars who are not only very smart about the game (I imagine most basketball stars have always been that) but also willing and able to explain how it's played with startling clarity (a friend pointed me to Simmons's series of interviews with the Warriors' Kevin Durant, and what I've heard so far is pretty amazing). 1  If sports are in fact in a battle with narrative brittleness, this is how you fight it.
 

He hits on something important. All the sports leagues have to deal with an onboarding problem with their televised content, and that is the learning curve of appreciation. If you haven't grown up watching and/or playing a sport, it's difficult to appreciate a lot of the moment to moment skill on display in any sporting event.

I did not grow up playing soccer, so I find so much of it boring to watch outside of the occasional spectacular goal. The ability of a team to keep possession, the skill of a single player like Messi to evade a gauntlet of defenders, so much of that skill is lost on me. The same goes for hockey, or cricket, or so many sports I didn't grow up with.

On the other hand, while many find baseball unbelievably boring, I played growing up, and so even a pitch that isn't swung is seen, by me, as one in a fascinating game theory exchange between pitcher and batter. One of the most exciting plays of the 2016 World Series to me was when Kyle Schwarber laid off a tantalizing slider from Andrew Miller because I knew what a great pitch it was and how much skill it took to not offer at it. For most viewers, it was just another ball, another twenty seconds of inconsequential activity.

The Olympics face this problem in spades because they include so many niche sports, but luckily for them, many of the events are short in nature, and the nature of the contest easily explained. When it isn't, the networks lean heavily on personal narrative, something that almost all viewers understand. We can debate until eternity whether Alina Zagitova or Evgenia Medvedeva deserved the gold medal in the women's figure skating final, but it didn't take an expert on figure skating to feel the tension backstage as each skater tried to get in each other's heads.

More forward-thinking sports leagues should consider, in the future, making it easier for analysts of all sorts to provide alternative broadcast commentary for their broadcasts. I'd be shocked if it didn't happen in my lifetime. Viewing your sports as broadcast platform with API's allowing for such diversity of integrated analysis would broaden the appeal to different audiences. As it is, some audiences cobble together such alternate peanut gallery chatter from Twitter, Periscope, Facebook, and other social media. I predict leagues will start integrating this content; it makes much more sense than Twitter licensing those video rights to try to facilitate such water coolers. The water cooler is heavy, it's plugged into the wall, and it's expensive; easier to go walk over there to chat than to try to carry the water cooler over to the discussion.

Exceeding this learning curve of appreciation isn't sufficient, however. Beyond that, there still exists the problem of rendering your content more culturally relevant, at this moment, than anything else on a person's phone. Anyone who's sat across from someone, only to see that their companion turn their attention to a smartphone, understands this modern conundrum.

This isn't just a problem for sports. In an age where Netflix is producing some 700 original series next year, not to mention all the ones from HBO and Amazon and Hulu and FX and on and on, every content provider has to become more thoughtful and creative about how to manufacture desire on the part of the viewer. The temptation, in tech, is to use some recommendations and machine learning to pick content to present to any one viewer, but that is going to be wholly insufficient.

When all you have is a hammer, everything looks like a nail, they say. When what you possess is lots of software engineers gifted at crunching large data sets, everything can look like an ML problem. That leaves huge swaths of human psychology on the table. There are still so many opportunities for so many services to render their content more relevant to a larger audience, a scary proposition to those who already find so many of their apps addictive.

Again, different categories of content tend to resort to the same narrow band of strategies as their competitors, but when we live in an age where almost all content across all mediums act as substitute goods for each other, companies and creatives should be widening their net to learn from outside their category. The competition won't wrestle on your terms, the battle is asymmetric.

A full list of such strategies is a topic for another day, but I'd argue every company should be looking at everything from House of Highlights to infomercials to Buzzfeed to Disneyland theme parks to high fashion to Costco to Beyonce and Rihanna to the fine art world to YouTube vloggers like Logan Paul to the design of Fortnite to just about everything about Las Vegas to pop-up restaurants to limited edition sneaker drops to folks like Tyler Cowen and Ben Thompson.

If we, as consumers, are fighting to resist the Siren song, then on the flip side is a pitched battle to spin the Siren song that will rise above the din.

Now stop your ship and listen to our voices.
All those who pass this way hear honeyed song,
poured from our mouths.

Revisionist commentary

I don't know that I'm aware of enough entries in this category to even consider it one, but I'm a sucker for the union of political and film satire as embodied in alternate film commentaries.

I was reminded of it when seeing The People's History of Tattooine which was first one of those spontaneous, emergent forms of Twitter humor that always brightens that otherwise dystopic landscape.

JACOB HARRIS
What if Mos Eisley wasn’t really that wretched and it was just Obi Wan being racist again?
 
TIM CARMODY
What do you mean, “these blaster marks are too precise to be made by Sand People?” Who talks like that?
 
JACOB HARRIS
also Sand People is not the preferred nomenclature.
 
TIM CARMODY
They have a rich cultural history that’s led them to survive and thrive under spectacularly awful conditions.
 
JACOB HARRIS
Mos Eisley may not look like much but it’s a a bedroom community with decent schools and affordable housing.
 
TIM CARMODY
You can just imagine Obi-Wan after years of being a Jedi on Coruscant being stuck in this place and just getting madder and madder.
 
JACOB HARRIS
yeah nobody cares that the blue milk is so much more artisanal on Coruscant
 
TIM CARMODY
Obi-Wan only goes to Mos Eisley once every three months to get drunk and he basically becomes like Byron.
 

Years ago, I laughed at UNUSED AUDIO COMMENTARY BY HOWARD ZINN AND NOAM CHOMSKY, RECORDED SUMMER 2002 FOR THE FELLOWSHIP OF THE RING (PLATINUM SERIES EXTENDED EDITION) DVD, PART ONE (here is part 2, and here are all four of the parts of their commentary for Return of the King).

CHOMSKY: And here comes Bilbo Baggins. Now, this is, to my mind, where the story begins to reveal its deeper truths. In the books we learn that Saruman was spying on Gandalf for years. And he wondered why Gandalf was traveling so incessantly to the Shire. As Tolkien later establishes, the Shire’s surfeit of pipe-weed is one of the major reasons for Gandalf’s continued visits.
 
ZINN: You view the conflict as being primarily about pipe-weed, do you not?
 
CHOMSKY: Well, what we see here, in Hobbiton, farmers tilling crops. The thing to remember is that the crop they are tilling is, in fact, pipe-weed, an addictive drug transported and sold throughout Middle Earth for great profit.
 
ZINN: This is absolutely established in the books. Pipe-weed is something all the Hobbits abuse. Gandalf is smoking it constantly. You are correct when you point out that Middle Earth depends on pipe-weed in some crucial sense, but I think you may be overstating its importance. Clearly the war is not based only on the Shire’s pipe-weed. Rohan and Gondor’s unceasing hunger for war is a larger culprit, I would say.
 
CHOMSKY: But without the pipe-weed, Middle Earth would fall apart. Saruman is trying to break up Gandalf’s pipe-weed ring. He’s trying to divert it.
 
ZINN: Well, you know, it would be manifestly difficult to believe in magic rings unless everyone was high on pipe-weed. So it is in Gandalf’s interest to keep Middle Earth hooked.
 
CHOMSKY: How do you think these wizards build gigantic towers and mighty fortresses? Where do they get the money? Keep in mind that I do not especially regard anyone, Saruman included, as an agent for progressivism. But obviously the pipe-weed operation that exists is the dominant influence in Middle Earth. It’s not some ludicrous magical ring.
 

A bit more, because I can't help myself:

ZINN: Right. And here we receive our first glimpse of the supposedly dreadful Mordor, which actually looks like a fairly functioning place.
 
CHOMSKY: This type of city is most likely the best the Orcs can do if all they have are cliffs to grow on. It’s very impressive, in that sense.
 
ZINN: Especially considering the economic sanctions no doubt faced by Mordor. They must be dreadful. We see now that the Black Riders have been released, and they’re going after Frodo. The Black Riders. Of course they’re black. Everything evil is always black. And later Gandalf the Grey becomes Gandalf the White. Have you noticed that?
 
CHOMSKY: The most simplistic color symbolism.
 
ZINN: And the writing on the ring, we learn here, is Orcish — the so-called “black speech.” Orcish is evidently some spoliation of the language spoken in Rohan. This is what Tolkien says.
 

Somewhat related is this, The Passion of the Christ: Blooper Reel.

Christ, shackled to a stone, is being scourged by Roman soldiers. Blood runs down his gory back. His pain is palpable.
 
Jesus: [writhes in pain, hands shaking]
 
[Cell phone rings.]
 
Jesus: [hands shake furiously]
 
[Cell phone rings. Caviezel looks up, sheepish.]
 
Roman soldier: Jim? That you?
 
Jesus: Yeah.
 
[Cell phone rings.]
 
Soldier: Want me to get it?
 
Jesus: Yeah.
 
[Roman soldier gingerly reaches into Caviezel’s blood-soaked loincloth, pulls out phone and opens it, then holds the phone to Caviezel’s ear.]
 
Off Camera: [laughter]
 
Jesus: Hey, Mom.
 

Are there more in this genre? If so, please share!

Why Information Grows

It is hard for us humans to separate information from meaning because we cannot help interpreting messages. We infuse messages with meaning automatically, fooling ourselves to believe that the meaning of a message is carried in the message. But it is not. This is only an illusion. Meaning is derived from context and prior knowledge. Meaning is the interpretation that a knowledge agent, such as a human, gives to a message, but it is different from the physical order that carries the message, and different from the message itself. Meaning emerges when a message reaches a life-form or a machine with the ability to process information; it is not carried in the blots of ink, sound waves, beams of light, or electric pulses that transmit information.
 

From the book Why Information Grows by Cesar Hidalgo. I read this book a long ways back in 2017,  but it's of no less interest now.

And it is the arrow of complexity—the growth of information—that marks the history of our universe and species. Billions of years ago, soon after the Big Bang, our universe did not have the capacity to generate the order that made Boltzmann marvel and which we all take for granted. Since then, our universe has been marching toward disorder, as Boltzmann predicted, but it has also been busy producing pockets that concentrate enormous quantities of physical order, or information. Our planet is a chief example of such a pocket.
 

When one first encounters the second law of thermodynamics, it's easy to tumble into despair at the pointlessness of everything. With the universe fated to collapse into heat death eventually, what is the point of it all?

In this existential void, the presence of pockets of information and order can feel like symbols of rebellion, a raised fist spray painted on a fragment of wall that remains from a bombed-out building. In manifestations of order we see intent, in intent we interpret meaning, and in meaning we find comfort.

Information, when understood in its broad meaning as physical order, is what our economy produces. It is the only thing we produce, whether we are biological cells or manufacturing plants. This is because information is not restricted to messages. It is inherent in all the physical objects we produce: bicycles, buildings, streetlamps, blenders, hair dryers, shoes, chandeliers, harvesting machines, and underwear are all made of information. This is not because they are made of ideas but because they embody physical order. Our world is pregnant with information. It is not an amorphous soup of atoms, but a neatly organized collection of structures, shapes, colors, and correlations. Such ordered structures are the manifestations of information, even when these chunks of physical order lack any meaning.
 

There are plenty of books on information theory, and viewing the universe through the lens of information and computation is increasingly popular, but Hidalgo's book is more readable than most.

To battle disorder and allow information to grow, our universe has a few tricks up its sleeve. These tricks involve out-of-equilibrium systems, the accumulation of information in solids, and the ability of matter to compute.
 
It is the growth of information that unifies the emergence of life with the growth of economies, and the emergence of complexity with the origins of wealth.
 
In twenty-six minutes Iris traveled from the ancientness of her mother’s womb to the modernity of twenty-first-century society. Birth is, in essence, time travel.
 

Birth as time travel is one of those metaphors that, once heard, lodges in your mind like something you always knew. When Arnold Schwarzenegger time travels back from the future to the modern day in The Terminator, he arrives naked, like a newborn.

[It is unclear why a cyborg from the future speaks with a thick Austrian accent, one of the only mysteries I have always hoped would be explained in some throwaway expository joke. My guess is that the voice was a marketing Easter Egg, like celebrity voices in Waze, and someone forgot to flip the Terminator back to its factory default voice before sending it back in time.]

Humans are special animals when it comes to information, because unlike other species, we have developed an enormous ability to encode large volumes of information outside our bodies. Naively, we can think of this information as the information we encode in books, sheet music, audio recordings, and video. Yet for longer than we have been able to write we have been embodying information in artifacts or objects, from arrows to microwave ovens, from stone axes to the physical Internet. So our ability to produce chairs, computers, tablecloths, and wineglasses is a simple answer to the eternal question: what is the difference between us, humans, and all other species? The answer is that we are able to create physical instantiations of the objects we imagine, while other species are stuck with nature’s inventory.
 

Another reason humans wouldn't evolve on a gaseous planet like Jupiter, besides the fact that we'd just burn up, is that without any solids we'd have no way of encoding information to pass on to future generations. Therefore, any advanced civilization in the universe would, it would seem, live in physical conditions that allow for the formation of solids, but not solids that are too rigid.

The temperature band matters. We need solids that are malleable to encode richer sets of information. Add to that the ability to compute, which we see in all forms in our world, down to the cellular level, and suddenly you have life. There is logic to why we look for specific conditions in the universe as precursors for life, and it can be defined more broadly than just looking for water, which is a downstream condition. Further upstream we just want a planet with solids, in a particular band of temperatures.

Such conditions allow living creatures to record and pass along information to the next generation. When humans finally were able to do so, they in effect conquered time. No longer did the knowledge of one generation evaporate into the sinkhole of mortality.

The car’s dollar value evaporated in the crash not because the crash destroyed the atoms that made up the Bugatti but because the crash changed the way in which these were arranged. As the parts that made the Bugatti were pulled apart and twisted, the information that was embodied in the Bugatti was largely destroyed. This is another way of saying that the $2.5 million worth of value was stored not in the car’s atoms but in the way those atoms were arranged. That arrangement is information.
 
...
 
So the value of the Bugatti is connected to physical order, which is information, even though people still debate what information is. According to Claude Shannon, the father of information theory, information is a measure of the minimum volume of communication required to uniquely specify a message. That is, it’s the number of bits we need to communicate an arrangement, like the arrangement of atoms that made the Bugatti.
 
...
 
The group of Bugattis in perfect shape, however, is relatively small, meaning that in the set of all possible rearrangement of atoms—like people moving in a stadium—very few of these involve a Bugatti in perfect condition. The group of Bugatti wrecks, on the other hand, is a configuration with a higher multiplicity of states (higher entropy), and hence a configuration that embodies less information (even though each of these states requires more bits to be communicated). Yet the largest group of all, the one that is equivalent to people sitting randomly in the stadium, is the one describing Bugattis in their “natural” state. This is the state where iron is a mineral ore and aluminum is embedded in bauxite. The destruction of the Bugatti, therefore, is the destruction of information. The creation of the Bugatti, on the other hand, is the embodiment of information.
 

One can separate out the intrinsic value of an item, defined above as the rarity of the state of the configuration of that item, from the external value of an item, as defined by qualities such as symbolic or emotional ones, like nostalgia.

In Pulp Fiction, Bruce Willis risks life and limb to recover a watch given to him by his father. There's no evidence it's a particularly rare watch, he could likely buy another just like it, but its symbolic value to him is extrinsic to the item yet tethered to it the way a genie is trapped in a magic lantern (and that special meaning is conveyed in the now immortal speech by Christopher Walken).

Even the most rational people I know own something that's not physically rare but emotionally rich, a talisman or totem that they use to summon whatever power it holds, whether it be nostalgia or regret or some other enchantment known only to themselves.

What Shannon teaches us is that the amount of information that is embodied in a tweet is equal to the minimum number of yes-or-no questions that Brian needs to ask to guess Abby’s tweet with 100 percent accuracy. But how many questions is that?
 
Shannon’s theory tells us that we need 700 bits, or yes-or-no questions, to communicate a tweet written using a thirty-two-character alphabet. Shannon’s theory is also the basis of modern communication systems.
 

One mathematical reason for the rising usage of emoji in Twitter and other forms of online communication may be that it increases the amount of information that can be encoded in 140 (and now 280) characters.

You'll recall from earlier that the third of the three conditions that allow information to grow is the ability of matter to compute.

To illustrate the prebiotic nature of the ability of matter to process information, we need to consider a more fundamental system. Here is where the chemical systems that fascinated Prigogine come in handy. Consider a set of chemical reactions that takes a set of compounds {I} and transforms them into a set of outputs {O} via a set of intermediate compounds {M}. Now consider feeding this system with a steady flow of {I}. If the flow of {I} is small, then the system will settle into a steady state where the intermediate inputs {M} will be produced and consumed in such a way that their numbers do not fluctuate much. The system will reach a state of equilibrium. In most chemical systems, however, once we crank up the flow of {I} this equilibrium will become unstable, meaning that the steady state of the system will be replaced by two or more stable steady states that are different from the original state of equilibrium.13 When these new steady states emerge, the system will need to “choose” among them, meaning that it will have to move to one or the other, breaking the symmetry of the system and developing a history that is marked by those choices. If we crank up the inflow of the input compounds {I} even further, these new steady states will become unstable and additional new steady states will emerge. This multiplication of steady states can lead these chemical reactions to highly organized states, such as those exhibited by molecular clocks, which are chemical oscillators, compounds that change periodically from one type to another. But does such a simple chemical system have the ability to process information? Now consider that we can push the system to one of these steady states by changing the concentration of inputs {I}. Such a system will be “computing,” since it will be generating outputs that are conditional on the inputs it is ingesting. It would be a chemical transistor. In an awfully crude way this chemical system models a primitive metabolism. In an even cruder way, it is a model of a cell differentiating from one cell type to another—the cell types can be viewed abstractly as the dynamic steady states of these systems, as the complex systems biologist Stuart Kauffman suggested decades ago. Highly interacting out-of-equilibrium systems, whether they are trees reacting to the change of seasons or chemical systems processing information about the inputs they receive, teach us that matter can compute. These systems tell us that computation precedes the origins of life just as much as information does. The chemical changes encoded by these systems are modifying the information encoded in these chemical compounds, and therefore they represent a fundamental form of computation. Life is a consequence of the ability of matter to compute.
 

What's lovely about all of these conditions that allow information to grow is their seeming relevance to individuals and groups of individuals, like corporations or societies or markets.

Humans are concentrated bundles of information with compute power, and when we push ourselves out of equilibrium, we accumulate information. When we crank up our inputs and force ourselves out of our own equilibrium, as we do when we become students, we grow as we restore ourselves to steady state. Whenever anyone complains that they're in a rut, I always counsel them to force themselves out of equilibrium.

***

That covers much of the first half of the book, all fascinating. However, the part of the book that's of broader interest to a business audience is Hidalgo's discussion of the economy as a creator of information.

It's easiest to understand the information creation capacity of an economy by examining its outputs, and the simplest outputs to understand are physical products.

Thinking about products as crystals of imagination tells us that products do not just embody information but also imagination. This is information that we have generated through mental computations and then disembodied by creating an object that mimics the one we had in our head. Edible apples existed before we had a name for them, a price for them, or a market for them. They were present in the world. As a concept, apples were simply imported into our minds. On the other hand, iPhones and iPads are mental exports rather than imports, since they are products that were begotten in our minds before they became part of our world. So the main difference between apples and Apples resides in the source of their physical order rather than in their embodiment of physical order. Both products are packets of information, but only one of them is a crystal of imagination.
 

Like many navel gazers in the tech industry, I'm guilty of stereotyping companies. Apple's strength is integrated hardware and software, Google is the king of machine learning and crunching large data sets, Facebook is the social network to end all social networks, and Amazon is the everything platform.

However, if you haven't worked or been inside any of those companies, it's fairest to judge them as black boxes into which inputs disappear and come out as various outputs, usually products and services like gadgets or websites or applications. Everything else is a mild form of fan fiction. 

By analyzing a company's outputs, one can deduce a great deal about its capabilities. Hidalgo does the same but at the country level.

The idea of crystallized imagination tells us that a country’s export structure carries information about more than just its abundance of capital and labor. A country’s export structure is a fingerprint that tells us about the ability of people in that country to create tangible instantiations of imaginary objects, such as automobiles, espresso machines, subway cars, and motorcycles, and of course about the myriad of specific factors that are needed to create these sophisticated products. In fact, the composition of a country’s exports informs us about the knowledge and knowhow that are embodied in that country’s population.
 

A country that can export a product like an iPhone generally has greater generative power than one that can only export raw materials like bananas. The telltale clues to the economic potential of a country lie not in its imports but its exports.

So what has any of this to do with Chile? The only connection between Chile and the history of electricity comes from the fact that the Atacama Desert is full of copper atoms, which, just like most Chileans, were utterly unaware of the electric dreams that powered the passion of Faraday and Tesla. As the inventions that made these atoms valuable were created, Chile retained the right to hold many of these atoms hostage. Now Chile can make a living out of them. This brings us back to the narrative of exploitation we described earlier. The idea of crystallized imagination should make it clear that Chile is the one exploiting the imagination of Faraday, Tesla, and others, since it was the inventors’ imagination that endowed copper atoms with economic value. But Chile is not the only country that exploits foreign creativity this way. Oil producers like Venezuela and Russia exploit the imagination of Henry Ford, Rudolf Diesel, Gottlieb Daimler, Nicolas Carnot, James Watt, and James Joule by being involved in the commerce of a dark gelatinous goo that was virtually useless until combustion engines were invented. Making a strong distinction between the generation of value and the appropriation of monetary compensation helps us understand the difference between wealth and economic development. In fact, the world has many countries that are rich but still have underdeveloped economies. This is a distinction that we will explore in detail in Part IV. But making this distinction, which comes directly from the idea of crystallized imagination, helps us see that economic development is based not on the ability of a pocket of the economy to consume but on the ability of people to turn their dreams into reality. Economic development is not the ability to buy but the ability to make.
 

At a corporate level, I can recall an age when Sony was the king of consumer electronics the world over. I first coveted a Walkman, then later a Discman. Our family spent its formative years huddled around a giant (at the time) Sony Trinitron TV, and we were the envy of all my friends for owning one. I looked forward to any trip to Japan for a chance to walk the electronics districts to purchase the coolest gadgets on the planet, and for years I owned a Minidisc player model that you couldn't find in the U.S.

And then the world shifted, and the gadget which subsumed all other gadgets was the computer, and as it shrank in size while growing in computational power, the way we interacted with such devices increasingly became software-based. In that competition, the vector which mattered more than anything became software design, a skill Sony had not mastered.

The company that understood both software and hardware design better than any company in the world happened to be located in Silicon Valley, not Japan, and, after a long Wintel interregnum, caused by a number of business factors covered comprehensively elsewhere, Apple's unique skills found themselves in a universe they could really dent. And dent they did.

Thanks especially to the market opportunity created by the smartphone, which it seized with the iPhone, Apple not only surpassed Sony and moved the balance of power in consumer technology across the Pacific Ocean to American shores but became the most valuable company in the entire world.

***

Not all information is easily embodied. For example, for a while I puzzled over what I'll call the Din Tai Fung Paradox.

Din Tai Fung is a restaurant chain, and I visited the original outlet in Taipei decades ago with my mother. They're known for their Shanghainese soup dumplings, made with a very delicate wrap that somehow never breaks and dumps its precious cargo of pork broth until the moment at which you prod it with your chopsticks just so. Some will argue whether Ding Tai Fung is all that and a bucket of chicken, but at a minimum I find the menu to be satisfying comfort food done consistently, in a setting that is usually cleaner and more well-kept than your average chain restaurant outlet. You'll find superior deals from a street vendor and more elaborate preparation at a higher-end restaurant, but Din Tai Fung industrializes and scales a Chinese staple. We don't pay enough attention to scale.

The mystery is why Din Tai Fung has opened so few outlets; they've only dropped locations in a handful of cities in about ten countries in the world, and every Din Tai Fung is packed solid from open to close with the type of ever-present line of humans snaked outside the front door that you so rarely see at any restaurant, let alone a chain.

For a few months, a new outlet was rumored to be opening in San Francisco soon, and among my friends it was as momentous a rumor as if a new Star Wars teaser trailer had dropped. Ultimately, one opened in the Bay Area, but in Santa Clara instead of San Francisco. 

Which leads to a further mystery: why haven't any competing chains opened up to make the same items to fill the market void? I would never open a restaurant, but my family knows I'd make an exception if I were granted the opportunity to open a branch of Din Tai Fung anywhere. I bring it up every family gathering, when there's a lull in the conversation. Forget cryptocurrency, I want to mint me some Din Tai Fung coin.

At every Din Tai Fung I've been to, they have a glass window so you can look into the kitchen to see the soup dumplings being wrapped, always by kitchen staff wearing white uniforms, almost like lab assistants, an impression magnified by the branches that require face masks. It's rumored that the branches in Asia try to hire the tallest, most attractive men to man the soup dumpling assembly line, but it sounds about as true as a lot of things my aunts and uncles tell me, which is to say it's more credible than I'd care to admit.

The hermetic vibe behind the glass is as far from the vendor selling goods from a street cart as possible; some find street food charming but if you're taking this food to a global audience it needs to be sanitized or sterilized, the same way movies for the Chinese market strip out any storylines that might offend. It's not just the front of the house that's immaculate, the show behind the glass display says they have nothing to hide. It's the equivalent of the blackjack dealer at a casino clapping and turning their hands one way and the other before moving to the next table.

More interesting to me was that Din Tai Fung even doesn't even bother to hide the process behind its staple dish, the evidence is on thousands of smart phones by this point, everyone seems to stop to take a photo or video of the assembly line while waiting for their table.

And yet any Chinese food fan knows it's notoriously hard to find a good soup dumpling. In this age where recipes for almost anything are available online for free, why can't you find a good soup dumpling in most major cities in the world? Or, for that matter, a good burrito, or any dish you love? Why are these crystals of imagination so unevenly distributed when the recipes for making them so broadly available?

The answer, as any home chef who has tried to make a dish from some highfalutin cookbook knows, is simple: you can have the most precise ingredient list and directions and still struggle to make anything approaching what you ate, whether it came from a $400 tasting menu or a mainstream cookbook. Cooking is not nearly as deterministic as the term recipe implies.

Slight variations in environment, weather, ingredients, and cookware can lead to massive differences in the final product. Your oven may say 400 degrees, but the actual temperature inside, at the precise spot where you've placed your baking dish, may be different. That celery you use for your mirepoix today may not be as fresh as the celery you used last week. The air pressure where you're cooking on a particular day may differ from that where you live, the bacteria in the air may also vary. Great chefs appear on Top Chef and flail making dishes they've made hundreds of times in their own restaurant kitchen because every bit of environmental variation matters.

We may glamorize the image of the genius, heroic chef, working magic to create a delicious and beautifully plated dish that a waiter places before us with a balletic flourish, but the true value creation in a restaurant comes from translating that moment of genius into a rote, repeatable cycle. The popularity of sous vide as a cooking technique, even at high end restaurants, comes down its repeatable precision and accuracy. Ask any chef and they'll tell you the value of a line chef who can cook dozens of proteins to the right level of doneness every time given the high cost of fish and meat.

In addition to all those conditionals, much of cooking skill comes down to learned muscle memory and pattern recognition that can only be encoded in a human being through repeated trial and error. I tried to learn some of my favorite of my mother and grandmother's dishes by writing down recipes they dictated to me, but much was lost in translation. Like so much maternal magic, it could only be learned, truly, at their side, with an apron on, watching, imitating, botching one dish after another, until some of it seeped into my bones.

In a memorable segment from the documentary Jiro Dreams of Sushi, apprentice Daisuke Nakazawa is assigned the job of making egg sushi, or tamago. He believes it will be simple, but again and again, Jiro rejects his work. Nakazawa ends up making over 200 rejected samples until finally, one day, Jiro approves. Nakazawa cries in relief and joy.

***

Hardware and software are not like cooking. When knowledge and instructions can be encoded in bits, a level of precision is possible that is effectively, for the purposes of this discussion, deterministic. Manufacturing a hundred million iPhones is like food production, but not the type done in high end or home kitchens. Instead, it is more like producing a hundred million Oreos.

There is one country in the world where that many iPhones can be manufactured for the cost that allows Apple to reap its insane profits: China. I can't think of any other country in the world, not India or Mexico or the United States, or all of Europe together that can make that many iPhones for that price to meet the market demand year after year. Some countries have the labor but not the skills, others have the skills but not enough labor, and others just can't do the work as cheaply as China can.

Recall that the potential of an economy can be judged by the complexity of its exports. Based on that, it's difficult to imagine an economy outside of the U.S. with more potential than China. Some of the most complex products in the world, and the iPhone deserves to be on that list, are made in China.

I've backed many a Kickstarter hardware project, and without fail, every one has been made in China, usually Shenzhen. Inevitably, when the products are delayed, the project's creators will send an update with some photos of a few of them in China, at some plant, examining some part that will get the project back on track, or with their arms around a few Chinese plant managers giving a thumbs up sign.

Kickstarter often feels like an industrial and software design and marketing operation layer grafted on top of the manufacturing capabilities of Shenzhen. It is an early warning indicator of China's economic potential, and the gap that remains to realizing it.

Here is another. Foxconn assembles iPhones for Apple, and for their efforts they make anywhere from $8 to $30 per iPhone, depending on what article you believe. Whatever the figure, we know it is not far off from that.

Apple, in contrast, makes hundreds of dollars per iPhone. They earn that premium, many multiples what Foxconn earns, by virtue of being the ones who designed every aspect of the phone, from the software to the hardware. China can supply labor and even sometimes components, but the crystal of imagination that is the iPhone, perhaps the most valuable such crystal in the history of the world, comes almost entirely from the imagination of employees of Apple. Foxconn is one cog in a long supply chain, and that link isn't the one made of gold.

However, to even have the capability of making an iPhone for less than the cost of a lunch in San Francisco is a skill, one China has shown again and again. Many another country wishes it had such a demonstrated skill. Were China ever able to gain some of the software and industrial design skills of a company like Apple, they would be even more of an economic powerhouse than they are now.

That's a massive conditional. It's not something that can be learned by mere handwaving or even sheer industriousness. After all, Sony could return to its former glory, or Samsung be even more dominant globally, if software design skills were so easily learned.

Someone someday will write a book of the history of software design and how it came to be that Apple built up that capability more than any other technology company, and I'll be among its most eager readers because it's an untold story that holds the key to one of the greatest value creation stories in the history of business.

...our world is one in which knowledge and knowhow are “heavier” than the atoms we use to embody their practical uses. Information can be moved around easily in the products that contain it, whether these are objects, books, or webpages, but knowledge and knowhow are trapped in the bodies of people and the networks that these people form. Knowledge and knowhow are so “heavy” that when it comes to a simple product such as a cellphone battery, it is infinitely easier to bring the lithium atoms that lie dormant in the Atacama Desert to Korea than to bring the knowledge of lithium batteries that resides in Korean scientists to the bodies of the miners who populate the Atacaman cities of Antofagasta and Calama. Our world is marked by great international differences in countries’ ability to crystallize imagination. These differences emerge because countries differ in the knowledge and knowhow that are embodied in their populations, and because accumulating knowledge and knowhow in people is difficult. But why is it hard for us to accumulate the knowledge and knowhow we need to transform our dreams into reality?
 

If knowledge were so easy to transfer, I'd be a three-star Michelin Chef because someone gifted me a copy of the Eleven Madison Park cookbook.

Getting knowledge inside a human’s nervous system is not easy because learning is both experiential and social.5 To say that learning is social means that people learn from people: children learn from their parents and employees learn from their coworkers (I hope). The social nature of learning makes the accumulation of knowledge and knowhow geographically biased. People learn from people, and it is easier for people to learn from others who are experienced in the tasks they want to learn than from people with no relevant experience in that task. For instance, it is difficult to become an air traffic controller without learning the trade from other air traffic controllers, just as it is difficult to become a surgeon without having ever been an intern or a resident at a hospital. By the same token, it is hard to accumulate the knowhow needed to manufacture rubber tires or an electric circuit without interacting with people who have made tires or circuits.6 Ultimately, the experiential and social nature of learning not only limits the knowledge and knowhow that individuals can achieve but also biases the accumulation of knowledge and knowhow toward what is already available in the places where these individuals reside. This implies that the accumulation of knowledge and knowhow is geographically biased.
 

What governs the information production capacity of a country? Hidalgo coins two terms to analyze this problem. One is the personbyte.

We can simplify this discussion by defining the maximum amount of knowledge and knowhow that a human nervous system can accumulate as a fundamental unit of measurement. We call this unit a personbyte, and define it as the maximum knowledge and knowhow carrying capacity of a human.
 

The other term is firmbyte.

The limited proliferation of megafactories like the Rouge implies that there must be mechanisms that limit the size of the networks we call firms and make it preferable to disaggregate production into networks of firms. This also suggests the existence of a second quantization limit, which we will call the firmbyte. It is analogous to the personbyte, but instead of requiring the distribution of knowledge and knowhow among people, it requires them to be distributed among a network of firms.
 

Hidalgo then delves a bit into Coase's transaction cost theory of the firm. Traditionally, Coase's theory is used as a way to explain why firms are fundamentally limited in their size, the idea being that at some size, external transactions become cheaper than internal coordination costs and so it's more efficient to just transact externally rather than produce internally.

I'm not interested in examining that topic now. Instead, let's assume that firms all do have some asymptote in size beyond which Coase's anchor becomes too heavy. The interesting implication is that given the existence of a ceiling on the size of the firmbyte, if some chunk of knowledge exceeds that capacity then it can only be carried by a network of firms.

It's long been said that the center of the technology universe shifted from Boston's route 128 to Silicon Valley because California banned non-competes (here's one study). Hidalgo's theory of the finite compute ability of a network of humans and firms explains how this works. The free movement of employees in Silicon Valley allows the region's knowledge-carrying capacity to increase at the expense of any single firm's benefit. Per Coase, the cost of information movement in Silicon Valley, as embodied by an employee carrying a personbyte from one firm to the next, is lower than it was in the route 128 corridor.

Let's telescope back out to the country level. What applies at the regional or industry level holds at the country level. A country's knowledge carrying capacity, and thus its information production power, is influenced in part by the size of networks it can form.

In his 1995 book Trust, he [Francis Fukuyama] argues that the ability of a society to form large networks is largely a reflection of that society’s level of trust. Fukuyama makes a strong distinction between what he calls “familial” societies, like those of southern Europe and Latin America, and “high-trust” societies, like those of Germany, the United States, and Japan.
 
Familial societies are societies where people don’t trust strangers but do trust deeply the individuals in their own families (the Italian Mafia being a cartoon example of a familial society). In familial societies family networks are the dominant form of social organization where economic activity is embedded, and are therefore societies where businesses are more likely to be ventures among relatives. By contrast, in high-trust societies people don’t have a strong preference for trusting their kin and are more likely to develop firms that are professionally run. Familial societies and high-trust societies differ not only in the composition of the networks they form—as in kin and non-kin—but also in the size of the networks they can form. This is because the professionally run businesses that evolve in high-trust societies are more likely to result in networks of all sizes, including large ones. In contrast, familial societies are characterized by a large number of small businesses and a few dominant families controlling a few large conglomerates.
 
Yet, as we have argued before, the size of networks matters, since it helps determine the economic activities that take place in a location. Larger networks are needed to produce products of higher complexity and, in turn, for societies to achieve higher levels of prosperity. So according to Fukuyama, the presence of industries of different sizes indicates the presence of trust. In his own words: “Industrial structure tells an intriguing story about a country’s culture. Societies that have very strong families but relatively weak bonds of trust among people unrelated to one another will tend to be dominated by small, family-owned and managed business. On the other hand, countries that have vigorous private nonprofit organizations like schools, hospitals, churches, and charities, are also likely to develop strong private economic institutions that go beyond the family.”
 

In Tyler Cowen's conversation with economist Luigi Zingales, the latter hints at the limitations of familial economies in humorous fashion:

One friend of mine was saying that the demise of the Italian firm family structure is the demise of the Italian family. In essence, when you used to have seven kids, one out of seven in the family was smart. You could find him. You could transfer the business within the family with a little bit of meritocracy and selection.
 
When you’re down to one or two kids, the chance that one is an idiot is pretty large. The result is that you can’t really transfer the business within the family. The biggest problem of Italy is actually fertility, in my view, because we don’t have enough kids. If you don’t have enough kids, you don’t have enough people to transfer. You don’t have enough young people to be dynamic.
 
The Italian culture has a lot of defects, but the entrepreneurship culture was there, has been there, and it still is there, but we don’t have enough young people.
 

Low fertility's impact on economies is an issue globally, for example in Japan, but low trust outside of family is an even broader constraint on the knowledge carrying capacity of an economy. If you can't form as large a firm as another country, you can't compete in some businesses and the information producing capability of your economy has a lower ceiling.

If you run a company, you're no doubt familiar with the efficiency gains that arise when different employees and departments operate with high trust. Links form easily given an assumption of low risk, and knowledge moves more quickly, fluidly. Networks then facilitate trust in a virtuous cycle, an example being the military as an integrating institution in a multi-ethnic society.

Trust based on family has its own advantages, but for now I'm focused on an economy's ceiling, and networks that throw off the shackles of family-based firms can scale more. China not only has the population to supply a workforce that can assemble 100 million iPhones in a year, it has an economy that has moved beyond any roots in family-based trust.

Hidalgo's theory also explains why we don't see geographic leakage in industry know-how. Why aren't there Silicon Valleys everywhere?

The personbyte theory can also help us explain why large chunks of knowledge and knowhow are hard to accumulate and transfer, and why knowledge and knowhow are organized in the hierarchical pattern that is expressed in the nestedness of the industry-location data. This is because large chunks of knowledge and knowhow need large networks of people to be embodied in, and transferring or duplicating large networks is not as easy as transferring a small group of people. As a result, industry-location networks are nested, and countries move to products that are close by in the product space.
 

When the knowledge required to create something like an iPhone or a Hollywood film require the interaction of multiple people, with all their accumulated knowledge, seizing it for yourself isn't as easy as poaching one employee or sprinting off with a burning branch to give fire to mankind like Prometheus. Thus we understand why, besides its weather, LA has such a grip on filmmaking for the global market, why any handset manufacturers can't just reverse engineer an iPhone, and why, despite having hundreds of millions of users for iMessages, Apple isn't a credible threat in social networking.

When I study the Chinese tech market, I see an incredibly high ceiling. In fact, the Chinese consumer market in tech is more dynamic now than its counterpart in Silicon Valley. Once, China was belittled for simply copying all the US tech companies. It's true, there is a Chinese Bizarro instance of all successful U.S. tech companies, a Chinese Google, Facebook, Amazon, Twitter, Instagram, YouTube, and so on.

Thanks to that complex interaction of culture and technology, however, China now creates companies with no real American equivalents, and that extends beyond WeChat. China also has more dense cities than America, and density creates its own unique consumer technology opportunities. You'll run out of fingers and toes before you come to a Chinese city as small as New York City, and that matters when many social products piggyback and rely on metropolitan densities as dry kindling.

The competition between tech companies in the U.S. draws scandalized chatter from the peanut gallery, but the pace at which something like Snapchat Stories was copied in the U.S. would be seen as laughably slow in China. Not only are features of competitors routinely copied within a week or two in China, employees are poached all the time in what is closer to a true approximation of a free labor market than even Silicon Valley. Knowledge moves quickly, freely.

Three things, in my observation, hold Chinese companies back from capturing more share in the international market, outside Chinese borders. Two are related, and those are an internationally appealing industrial and software design aesthetic.

It's true, people who find many Chinese software UI's to be busy and crowded can't read Chinese and thus don't understand their localized appeal to the Chinese market. As eye-tracking studies have shown (example), Chinese users scan pages differently, and why shouldn't they considering the fundamental differences between an alphabetic language like English and a pictographic one like Chinese?

Still, most of the international market can't read Chinese. In my past work with UI designers in China, I find it takes more prompting to arrive at something more broadly intuitive for, say, an American market.

The same goes for industrial design, where, akin to the denser informational aesthetic of Chinese software, a somewhat more maximalist impulse takes hold. It's still quite common to walk into an Asian electronics superstore and see display signage that lists dozens of bullet points of features in selling a product. Contrast that to the almost non-existent signage in an Apple store for the extreme opposite.

A more tangible example is something like the user interface of everyone's favorite cooking gadget, the Instant Pot. I received one as a gift last year, and no doubt, I think it's a real value at $80 or so for the base model. For how harried we all feel, a pressure cooker is way more useful a kitchen gadget than most.

However, this is the instrument panel on the front of the Instant Pot.

In practice, it's even more confusing than it appears on first glance. I won't delve into it here, but given a simple design pass, the entire UI could be made much less intimidating, much more intuitive. Given the functionality of any pressure cooker, the functionality can be reduced to a much simpler instrumentation.

These two skill gaps in software and industrial design allow for a continued Kickstarter arbitrage opportunity that slaps a more internationally appealing software and industrial design, along with the more internationally appealing marketing, on top of Shenzhen's manufacturing capabilities.

The last thing holding back more Chinese startups, in my experience, is a shortage in the professional management class. I know, I know, MBA's get a bad rap in the domestic market, but having many CEO's with engineering background at so many Chinese tech companies comes with its own drawbacks.

This management gap may be related to the style of org structure and management which others have mentioned to me as less conducive to certain types of innovation, though it's harder for me to assess without having worked inside a Chinese company.

None of this needs to matter since the Chinese market is so massive. Chinese startups can succeed wildly without ever making a peep outside their home territory. Besides, how a design aesthetic and process can seep into a country's soul remains a mystery to me, but my guess is it's about as slow-moving as trying to produce a high quality soup dumpling in a new market.

Still, I love to muse on the potential of China. In fact, there is one Chinese company that best exemplifies the potential of the country's tech market on the international stage. Last summer, a friend of mine who had worked at this company heard I was in the market for a drone and referred me to a friend who was selling an extra, lightly used Mavic Pro which he'd purchased after he thought he'd lost his original.

I don't know the first thing about flying drones, but it took me all of fifteen minutes or so to get the thing up and flying around in the air, capturing 4K video. It is an fantastic feat of engineering, probably still the single drone I'd recommend to anyone looking to get into drone photography (though I recommend getting a bundle with some extra batteries and a carrying case).

DJI had a few advantages in surging to its undisputed leadership position in the global drone market. First, this is a product category where how well the product actually works is more complex a task than in others. Many drones just don't fly that well. Being an engineering-led company is a strength here, and as long as the industrial design is optimized for flight, it doesn't really matter if your product isn't the sleekest. You won't care what it looks like when it's several hundred feet up in the air.

Second, from a software design perspective, drone UI design can piggyback on flight UI templates that have been worked out over the years. One reason I was up and running so quickly with my Mavic Pro is that the flight sticks imitate video game flight controls. The UI isn't quite as simple as I'd like, but I was fluent much more quickly than the hefty page count of the instruction manual implied.

Estimates of DJI's market share vary, but they are all well north of 50%, and most of its competitors have either left the market entirely or are struggling to stay aloft, so to speak. Here is a vertically integrated Chinese company that most definitely makes more than the cost of cheap SF lunch that Foxconn makes for each iPhone it assembles.

Now, making drones and building smartphones or writing apps are not the same skills. Drones, as exciting as they are, still aren't the type of thing I'd recommend except to photography enthusiasts. And China is a long way from dominating the consumer electronics market internationally with a massive portfolio of products from domestic, vertically integrated companies.

But the ceiling at least exists. it's not theoretical. It's more than any other country outside the U.S. can say, and how China answers it is one of the questions which will determine the relative economic power of China versus the United States in this century.

***

That China can export drones more easily than it can import, say, the software and industrial design know-how of a company like Apple is, at a higher level, a fundamental question of how we can pass along knowledge of any sort. Why are we not better at transferring know-how to industrial workers who are out of a job, why hasn't the internet produced a global leveling of industrial know-how at the country level?

Hidalgo notes:

At a finer scale, economies still lack the intimate connection between knowhow and information that is embodied in DNA and which allows biological organisms to pack knowhow so tightly. A book on engineering, art, or music can help develop an engineer, artist, or musician, but it can hardly do so with the elegance, grace, and efficiency with which a giraffe embryo unpacks its DNA to build a giraffe. The ability of economies to pack and unpack knowhow by physically embodying instructions and templates as written information is much more limited than the equivalent ability in biological organisms.
 

We are nowhere near our maximum throughput for passing on our knowledge to our fellow man, let alone across the membrane between companies and economies. In The Matrix, with a few seconds of fluttering eyelids, Keanu Reeves downloads an entire martial art into his self.

Give a man a kung-fu, you making him Neo. Teach a man to kung-fu, you make him John Wick. 

That is the dream. Asky any parent who is in the midst of trying to get a three-year-old to eat their dinner without throwing half of it on the ground and they'll nod in agreement. What is our version of nature's DNA and cell school of knowledge compression and decompression?

One of the reality TV shows which I wish existed would be one in which a variety of masters in their field compete to take absolute novices from a standing start as far as possible in a finite period of time. Instead of Top Chef, in which contestants are all successful chefs already, I want three master chefs to have to each train a handful of complete cooking dunces over a several month process, and the teacher and winning student share the pot.

Each season could have variant skills. In another, maybe the world's top three piano teachers have to train people who've never played the piano in their lives to sight-reading Chopin. Bill Belichick and Nick Saban coach two youth league football teams to see which wins a season finale scrimmage. I'm sure some of you will write me to tell me some version of a show like this exists already, but I've seen some that come close, but almost all the ones I've seen spend much too little time on the actual instruction methodology and process, and that's where all the mystery and interest lies.

In future posts, I'll delve into some of the limitations I've observed in how we pass information among people, companies, and economies, and from one generation to the next. For now, I recommend picking up Hidalgo's book, and I hope to hear from you about some of the ways you've found to help grow information around you in more efficient ways.

My first podcast appearance

A few months ago David Perell emailed and asked if I'd like to be on his podcast, The North Star. He mentioned some of the other people he'd had on, so many of whom I admire, and I thought he had emailed the wrong person. But no, he had done his research and knew a lot about my preoccupations and obsessions.

David passed through San Francisco before this past holiday break on his way to Australia, and we chatted at my apartment for a night, much of which is captured in this podcast. I've had a small handful of invitations to be on podcasts, but it was always trickier when I was working given the varied concerns of corporate PR, and I always wanted to do my first podcast in person rather than remotely.

If you enjoy my work here at my site, perhaps you'd be game to sample me in another medium? We cover some of the topics I've covered here before, but we spend a bit more time on my personal history, anchoring those topics along my professional timeline. I had a lot of fun and hope to perhaps drop in on another podcast or two in 2018.

Beware the lessons of growing up Galapagos

In All the old rules about movie stardom are broken, part of Slate's 2017 Movie Club year end review, Amy Nicholson writes:

Lugging my $10 masterpiece back to the hotel, I thought about how most of the famous faces who represent the movies have been dead for 50 years. Marilyn’s smile sells shot glasses, clocks, calendars, posters, and shirts in stores from Sunset Boulevard to Buenos Aires, Tijuana to Taiwan. What modern actor could earn a seat at her table? The biggest stars of my lifetime—Julia Roberts, Brad Pitt, Nicolas Cage, Sandra Bullock—never graduated past magazine covers to souvenir magnets.
 

If Hollywood played by its old rules, I, Tonya’s Margot Robbie and Call Me by Your Name’s Armie Hammer should be huge stars. They’re funny, smart, self-aware, charismatic, and freakishly attractive. Yet, they feel like underdogs, and I’m trying to figure out why. Robbie has made intelligent choices. Her scene-stealing introduction as Leonardo DiCaprio’s trophy wife in Wolf of Wall Street. Her classic romantic caper with Will Smith in the underseen trifle, Focus. She even survived Suicide Squad with her dignity intact. In I, Tonya, she can’t outskate being miscast as Tonya Harding, but bless her heart for trying. As for Hammer, Kameron, your review of Call Me by Your Name called him, “royally handsome,” which seems right. He’s as ridiculously perfect as a cartoon prince, and I loved how Luca Guadagnino made a joke of how outlandish the 6-foot-5 blond looks in the Italian countryside. Whether he’s unfurling himself from a tiny Fiat or stopping conversation with his gangly dance moves, he can’t blend in—and good on him and Guadagnino for embracing it.
 

But even if Robbie and Hammer each claim an Oscar nomination this year, I suspect they’ll stay stalled out in this strange time when great actors are simply supporting players in a superhero franchise. I’m fascinated by Robbie and Hammer because they’re like fossils of some alpha carnivore that should have thrived. Does anyone else feel like the tectonic plates under Hollywood have shifted and we’re now staring at the evidence that everything we know is extinct? It’s not just that the old rules have changed—no new rules have replaced them. No one seems to know what works.
 

Nicholson goes on to cite Will Smith, who once had huge hits seemingly with every movie he made and who is now on a long cold streak.

I'm wary of all conclusions drawn about media in the scarcity age, including the idea that people went to see movies because of movie stars. It's not that Will Smith isn't charismatic. He is. But I suspect Will Smith was in a lot of hits in the age of scarcity in large part because there weren't a lot of other entertainment options vying for people's attention when Independence Day or something of its ilk came out, like clockwork, to launch the summer blockbuster season.

The same goes for the general idea that any one star was ever the chief engine for a film's box office. If the idea that people go see a movie just to see any one star was never actually true, we can stop holding the modern generation of movie stars to an impossible standard.

The same mistake, I think, is being made about declining NFL ratings. Owners blame players kneeling for the national anthem, but here's my theory: in an age of infinite content, NFL games measure up poorly as entertainment, especially for a generation that grew up with smartphones and no cable TV and thus little exposure to American football. If I weren't in two fantasy football leagues with friends and coworkers, I would not have watched a single game this season, and that's a Leftovers-scale flash-forward twist for a kid who once recorded the Superbowl Shuffle to cassette tape off a local radio broadcast just to practice the lyrics.

If you disregard any historical romantic notions and examine the typical NFL football game, it is mostly dead time (if you watch a cut-down version of a game using Sunday Ticket, only about 30 minutes of a 3 to 3.5 hr game involves actual game action), with the majority of plays involving action of only incremental consequence, whose skill and strategy on display are opaque to most viewers and which are explained poorly by a bunch of middle-aged white men who know little about how to sell the romance of the game to a football neophyte. Several times each week, you might see a player hit so hard that they lie on the ground motionless, or with their hands quivering, foreshadowing a lifetime of pain, memory loss, and depression brought on by irreversible brain damage. If you tried to pitch that show concept just on its structural merits you'd be laughed out of the room in Hollywood.

Cultural products must regenerate themselves for each successive age and generation or risk becoming like opera or the symphony is today. I had season tickets to the LA Phil when I lived in Los Angeles, and I brought a friend to the season opener one year. A reporter actually stopped us as we walked out to interview us about why we were there, so mysterious it was to see two attendees who weren't old enough to have been contemporaries of the composer of the music that night (Mahler).

Yes, football has been around for decades, but most of those were in an age of entertainment scarcity. During that time the NFL capitalized on being the only game in town on Sundays, capturing an audience that passed on the game and its liturgies to their children. Football resembles a religion or any other cultural social network; humans being a tribal creature, we find products that satisfy that need, and what are professional sports leagues but an alliance of clans who band together for the network effects of ritual tribal warfare?

Because of its long incubation in an era of low entertainment competition, the NFL built up massive distribution power and enormous financial coffers. That it is a cultural product transmitted by one generation to the next through multiple channels means it's not entirely fair to analyze it independent of its history; cultural products have some path dependence.

Nevertheless, even if you grant it all its tailwinds, I don't trust a bunch of rich old white male owners who grew up in such favorable monopolistic conditions to both understand and adapt in time to rescue the NFL from continued decline in cultural relevance. They are like tortoises who grew up in the Galapagos Islands, shielded on all sides from predators by the ocean, who one day see the moat dry up, connecting them all of a sudden to other continents where an infinite variety of fast-moving predators dwell. I'm not sure the average NFL owner could unlock an iPhone X, let alone understand the way its product moves through modern cultural highways.

Other major sports leagues are in the same boat though most aren't as oblivious as the NFL. The NBA has an open-minded commissioner in Adam Silver and some younger owners who made their money in technology and at least have one foot in modernity. As a sport, the NBA has some structural advantages over other sports (for example, the league has fewer players whose faces are seen and who are active on social media in an authentic way), but the league also helps by allowing highlights of games to be clipped and shared on social media and by encouraging its players to cultivate public personas that act as additional narrative fodder for audiences.

I remember sitting in a meeting with some NFL representatives as they outlined a long list of their restrictions for how their televised games could be remixed and shared by fans on social media. Basically, they wanted almost none of it and would pursue take-downs through all the major social media companies.

Make no mistake, one possible successful strategy in this age of abundant media is to double down on scarcity. It's often the optimal strategy for extracting the maximum revenue from a motivated customer segment. Taylor Swift and other such unicorns can only release their albums on CD for a window to maximize financial return from her superfans before releasing the album on streaming services, straight from the old media windowing playbook.

However, you'd better be damn sure your product is unique and compelling to dial up that tactic because the far greater risk in the age of abundance is that you put up walls around your content and set up a bouncer at the door and no one shows up because there are dozens of free clubs all over town with no cover charge.

Sports have long had one massive advantage in production costs over scripted entertainment like TV and movies, and that is that their narrative engine is a random number generator (RNG). If you want to produce the next hot streaming series, you have to pay millions of dollars to showrunners and writers to generate some narrative.

In sports, the narrative is embedded in the rules of the game. Some players will compete, and someone will win. It's the same script replayed every night, but the RNG produces infinite variations that then spin off infinite variations of the same narratives for why a game turned out one way or the other, just as someone has to make up a story every day to explain why the stock market went up or down. At last check, RNG hadn't found representation with CAA or WME or UTA and thus its services remain free.

Unfortunately for major sports, this advantage is now a weakness as sports narrative is much more brittle than its entertainment counterparts. Narrative is a hedge against disaggregation and unbundling, and that is a critical moat in this age of social media and the internet.

One way to measure entertainment value on this dimension is to ask whether you can read a summary of a narrative and enjoy it almost as much as consuming the original narrative in its native medium. My classic test of this is for movies and TV shows. If you can enjoy a movie just as much by reading the Wikipedia plot summary as by watching it, or if you can enjoy a TV shows almost as much by reading a recap than by bingeing it on your sofa, then it wasn't really that great a movie or TV show to begin with.

Instead of watching the entire last season of Game of Thrones when it returns in 2019, I offer you the alternative of just reading textual recaps to your hearts content online. Is that as enticing an alternative as actually watching all six or seven episodes? You'll ingest all the plot details either way, but for the vast majority of fans this would be a gut-wrenching downgrade.

My other test of narrative value is a variant of the previous compression test. Can you enjoy something just as much by just watching a tiny fraction of the best moments? If so, the narrative is brittle. If you can watch just the last scene of a movie and get most or all the pleasure of watching the whole thing, the narrative didn't earn your company for the journey.

Much more of sports fails this second test than many sports fans realize. I can watch highlights of most games on ESPN or HouseofHighlights on Instagram and extract most of the entertainment marrow and cultural capital of knowing what happened without having to sit through three hours of mostly commercials and dead time. That a game can be unbundled so easily into individual plays and retain most of its value to me might be seen as a good thing in the age of social media, but it's not ideal for the sports leagues if those excerpts are mostly viewed outside paywalls.

This is the bind for major sports leagues. On the one hand, you can try to keep all your content inside the paywall. On the other hand, doing so probably means you continue hemorrhaging  cultural share. This is the eternal dilemma for all media companies in the age of infinite content.

Two nights ago, I watched a clip of multiple angles of Tua Tagovailoa ripping a laser beam of a pass to win the National Championship for Alabama. I didn't watch it live, or on ESPN. I watched it on HouseofHighlights on Instagram, where, instead of hearing some anchor on Sportscenter basically tell me what I can see with my own eyes, the video spins around after a moment to reveal the stunned face of the fan who just witnessed the pass live, reaction videos being a new sort of genre which allows a person in the video to act as the emoji reaction caption from within the video itself, speaking a visual language that most young people of this YouTube/Snapchat generation are already familiar with but which traditional media doesn't notice, let alone grok.

This disaggregation problem extends to ESPN, currently still the 400 pound gorilla in the sports media jungle (reminder, there are no 800 lb gorillas). The network suspended Jemele Hill for tweeting something negative about Trump, using the same playbook as the NFL, who threatened players with suspension for kneeling for the national anthem. Both believed these actions on the part of their talent were harming the value of their product.

The irony is that if both ESPN and the NFL had let these things play out naturally, I suspect at worst it would have been neutral, and at best it might have increased their ratings. For the NFL, the ties to modern movements for social justice might have kept the league and its games in the national conversation and made it tangentially relevant to the next generation. The most culturally relevant bit of Sportscenter today may just be the Sportscenter Top 10, as athletes who make a stunning play routinely tell reporters they are excited to see if they'll be featured on that evening's roundup of the top 10 plays.

Unfortunately, many athletes already see an appearance in HouseofHighlights as the social media alternative to appearing in the Sportscenter Top 10. If you follow top athletes on Instagram, you can see which of them favorite posts on HouseofHighlights. Lebron James routinely favorites posts, as do many other stars. Since many of those athletes follow each other on Instagram, that feature of Instagram produces common knowledge. It's not just that Donovan Mitchell knows that Lebron James favorited a HouseofHighlights clip of him dunking, it's that Mitchell knows that James knows that Mitchell knows and so on.

For ESPN, hewing to the idea that only highlights presented dispassionately or games broadcast respectfully are key to their value is a risky one. Not that they haven't generated a ton of wealth from doing so, and not that TV broadcast rights to major sports aren't still extremely valuable, but those are much more fixed commodities, available to the highest bidder, and ones whose value are close to their peaks, if not past them. This can't be a complete surprise within the four walls of their corporate offices given how much salary and air time they devote to blowhards like Stephen A. Smith and Skip Bayless, but their hesitance to lean into cultivating more original voices will haunt them in the long run. The average caption on an Instagram clip of a major sports league highlight is about twice as likely to be fresh and contextually humorous to a young person than any amount of generic sportscaster hooey spouted on ESPN.

This vulnerability extends to their online presences. I still visit ESPN.com on the web and on my mobile devices to get my sports news roundup each day, but sometime in the past few years, the designs of all these presences shifted dramatically. Gone was a hierarchical layout with different sized headlines and groupings of stories. In its place is a long center gutter of updates from a variety of sports leagues, in modern news feed style.

One can see why they went this way, it made ESPN more current, allowing them to push the latest stories to the top of the page to compete with people getting more current updates from Twitter and other social media sites. For a smartphone, in particular, with its limited screen space, it's not easy to block content into multiple sections on one page.

However, the moment you copy someone else's design, you've shifted the terms of the debate in their favor. In a previous era, ESPN's visually distinct information hierarchy set itself up as the authority on what stories mattered. In the new design, what matters skews towards what's the last thing to happen. It's all flow.

To some extent, in our hyper-personalized world, the era of any media entity deciding what stories matter more than others was always going to decline from what might be seen now as a temporary heyday. I care more about Chicago sports teams and Stanford given my background, so having those elements given more prominence was a notable improvement in the site's newly personalized design. Still, what is lost is that sense of authority, that ESPN sets the terms of the debate. Humans remain a social animal, and we take cues about what matters from our each other, including our media entities. ESPN has ceded more and more of the work of determining our sports Schelling points to other entities.

While this may sound grim, the major sports, their respective leagues, and ESPN all have a fairly solid near term window. For one thing, sports is still the highest volume, highest popularity real-time entertainment. As such, it remains a linchpin of many entertainment packages including cable bundles, and so we'll see various media companies pouring money into it until it can't hold things together anymore. We may even see the prices bid even higher for some time as often happens for assets being milked for their last but fleeting window of cultural scarcity.

A second and less discussed factor is that most young tech CEO's don't know the first thing about sports. They, like a sizable part of Silicon Valley (the group that tweets #sportsball whenever Twitter is inundated with reactions to some notable sports event), grew up with other interests. Without that intuitive sense of sports' place in culture, they aren't as attuned to the opportunities in that category.

This provides the leagues opportunities to swindle the tech companies for a while longer, an example being the rights to stream Thursday Night Football, which a series of tech companies from Yahoo to Twitter to Amazon have (probably) overpaid for the last few seasons. As Patrick Stewart said in L.A. Story, "You think with a statement like this you can have the duck?!" The chef says, "He can have the chicken!" Thursday Night Football is zee chicken of the NFL broadcast portfolio, but the restaurant is still called L'Idiot.

This happened for tech companies when they tried to add film and television to their portfolio, too. They routinely paid fortunes for the rights to back seasons of shows that are no longer relevant anymore. When I was at Hulu, I could only shake my head when I heard the asking price for all the back seasons of Seinfeld. Years later, long after I'd left, Hulu paid multiples of that. The cultural decay curve for content in this age of abundance is accelerating by the day, and there is no equivalent of botox to ward it off.

Given market feedback, however, such temporary arbitrage never lasts long. The days of the NFL strong-arming its partners to overpay for the most meager of rights are coming to an end. The thing about setting up a moat around your content is that the moment your cultural value crosses its peak, the moat becomes a set of prison bars. The flywheel loop can turn just as furiously counter-clockwise as clockwise.

And one of these days, a tech company will look at ESPN's homepage and notice how much it looks like their own. If they just put a bit more structure around it, could they satisfy that sports itch for their captive audience which already check in with them multiple times a day?

It seems implausible today, but look at what happened in film and television. For the longest time, so many tech companies were guilty of exactly what Hollywood accused them of, not understanding how film and television is made and marketed, how that industry creates demand for its product. Like all engineering led-cultures, Silicon Valley suspected Hollywood of not being data-driven enough, and many suspected that upstream process failures were responsible for failed releases. Half a film's budget is spent on prints and marketing? What a waste! (Engineers despise marketing.)

Forget that most of these people in tech had never been on a film set, or sat inside a writer's room, or seen the volumes of market research done before any film's release. It's all just content, let's just crowd source some alternatives. Or, if we produce some premium content, what's needed is earlier crowd-sourced feedback. Hundreds of millions of dollars were wasted before Silicon Valley realized they didn't know what they were doing.

Fortunately, all it cost them was some money and some time, something most of the incumbents have a surplus of. Now they write checks to creatives in Hollywood and leave them alone to do what they do very well already. Machine learning improves with data even when the algorithms are off, and so do most tech companies.

I am a lifelong lover of media in all its forms, and sports in particular was central to how I assimilated into America. It has long served as cultural connective tissue between me and friends, family, and strangers. But if I had an easy way to short all the major sports leagues over the next decade, I would. Nostalgia serves many purposes, but its most dangerous one is wrapping us in a memory of a time when we were still relevant.