Monthly Reading, August 2021
Monthly Reading, August 2021
Res Extensa #11 :: A tour through crypto-land, deeper on systems thinking, the metaverse, and solid-state economics
Hello!
It's been a minute since the last issue. Things haven't slowed down here at RE HQ through the summer. Now the kids are back in school and some home projects have finished up, I've been able to get the blog going a bit more lately. And hopefully the newsletter follows suit.
On to this month's favorites...
A Tour of Crypto-land
In the last few months I've found myself digging deeper and deeper into crypto communities, upping my skin in the game on Ethereum, DeFi projects, and recently the digital art world.
Here are a few recent favorites on the crypto theme.
💻 Own the Internet
Ethereum is like a drug to fans of decentralization. In this piece, fellow McCormick Packy (no relation) makes the bull case for Ethereum as the foundation for the internet's next evolution:
Ethereum is so many things at once, all of which feed off of each other. Ethereum, the blockchain, is a world computer, the backbone of a decentralized internet (web3), and the settlement layer for web3. Its cryptocurrency, Ether (ETH), is a bunch of things, too: Internet money. Ownership of the Ethereum network. The most commonly-used token in the Great Online Game. Yield-generating. A Store of Value (SoV). A bet on more on-chain activity, or the web3 future.
Of all blockchain projects, Ethereum puts a higher premium on decentralization and security than any other, with some so-far trade-offs in speed and throughput that the community is working on.
If you take away one thing from the essay, it should be a recognition of Ethereum as much more than cryptocurrency. Buying ETH on Coinbase is like buying gasoline without using it. To realize what Ethereum is really doing, you have to go deeper and put your ETH to work.
Ethereum is so much more than a cryptocurrency. It’s a “world computer,” and the “value layer” of the internet. It lets people build apps and products with money baked into the code. If you believe that web3 is going to continue to grow, then you likely believe that over time, Ethereum will become the settlement layer of a new internet.
We're still in the Mosaic era of web3. The killer applications for the World Computer haven't even been uncovered yet.
I'm still a skeptic of the way the "Bitcoin maxis" talk about crypto: the cult-like zeal, insane conferences, relentless tweets about pumps and replacing the dollar and killing all other currencies. It's going to take a long time for web3 to go mainstream, but I'm placing my bets early.
🖼 NFTs and a Thousand True Fans
It's easy to make fun of the NFT boom — "people are paying millions for JPEGs, it's a bubble, it's just crypto-rich blowing their early investments."
If you're a skeptic, I'd suggest checking out this piece from Chris Dixon, where he makes one of the most concise cases for NFTs and how the technology goes far beyond JPEGs, and will become a tool for connecting creators and consumers without intermediaries. The web2 era (social media, mobile) widely expanded the market for creators. No longer did you need a production studio, newspaper, or radio station to reach an audience. But an effect of this economy was the creation of superaggregator platforms like YouTube and Twitter that still sat in the middle. As a result, many creators don't truly own their audiences, and audiences have no mechanisms to share in the upside of committing their attention and participation. Dixon's summary gets to the bone:
Incumbent social media platforms sidetracked this vision by locking creators into a bundle of distribution and monetization. There are, correspondingly, two ways to challenge them: take the users, or take the money. Crypto and NFTs give us a new way to take the money. Let’s make it happen.
Ξ The Billion User Table
When you sign up for a service, we're all familiar with handing over a piece of our identity in exchange for access, even for things as dumb as a one-time retail purchase, a restaurant order, or an online game. We're constantly encountering sign up forms asking us for emails, ages, addresses, and various other personal details to even gain access.
In this article, Jon Stokes talks about the "user tables" of tech companies as the coin of the realm, and how Ethereum is pulling data stewardship back over to users. If you've never used dApps (decentralized apps) before, it's glorious. Visit a site, connect your wallet, and all interactions the service has with your personal identity have to be approved and committed to the blockchain, by you.
For most tech companies, a growing user table is key to driving profitable network effects. How might network effects work in a web3 world?
If you want to build a set of network effects that benefit your company specifically, it won't be enough to simply cultivate a large users table or email list — no, you'll have to offer something on-chain that others are also incentivized to use, so that the thing you're uniquely offering spreads and becomes a kind of currency.
There's a long way to go to improve on-ramping and adoption of web3 tech. Setting up addresses, wallets, and seed phrases is hilariously complicated today. But I'm confident that with effort bridges can be built to attract wider audiences.
Also check out my recent post on this topic.
Systems Thinking
Some great content this month on systems, from a few different angles. This subject continues to pop up in places I wouldn’t expect to find it.
➰ Dancoland
Alex Danco's been working on a series of articles over the past month or so, explaining how systems thinking works through parable.
I've read books on this topic, and it's a profound, mind-altering subject that'll change the way you think about complexity, dynamic systems, and cause and effect relationships. Now when I'm talking to someone about systems thinking, instead of recommending a book, just go read Alex's series.
Make sure to follow up with parts 2 thru 5. And check out RE 6 where we went deep on systems thinking.
🚀 Elon's tour of Starbase
This was an incredible 3-part series with Elon giving a walking tour through SpaceX's Starbase facility in Boca Chica, Texas. The entire thing is excellent. Elon is in that rarified class of leaders that have deep knowledge of their field, and pride themselves on being in the trenches building, creating, and understanding. You can sense his excitement at being on the factory floor as crews are running all over the place frantically assembling spacecraft.
My favorite part starts at the 13:25 mark, where he steps through an explainer of his 5-step process for product development, summarized roughly like so:
Make your requirements less dumb — “requirements are particularly dangerous if a smart or senior person gave them to you” (more resistant to critique)
Try very hard to delete parts & processes — “if you aren't occasionally adding things back in, you aren't deleting enough”; “you can make just-in-case arguments for too many things”
Simplify or optimize — this must come after the first 3 (Elon drops a great quote here: "The most common error of a smart engineer is to optimize a thing that should not exist")
Accelerate cycle time — the faster you ship, the faster you learn
Automate — further accelerate flow; reduce overhead costs
The proper path is to run these in that sequence, but he gives some funny examples from Tesla where they inappropriately ran the series in reverse, with big negative consequences.
💡 Sowell's Knowledge and Decisions
This book's been called Thomas Sowell's most important work. I'm reading it now, and what the reviewer here says is absolutely true:
One of the most famous and insightful pieces of economic writing is Friedrich Hayek's The Use of Knowledge in Society. Most of you have probably read it, if you didn't I can really recommend it!
Economist Thomas Sowell wrote a book Knowledge and Decisions, building further on this line of reasoning. Compared to the article, there is not that many new insights. But Sowell expands on Hayek's worldview and offers some interesting definitions and ways of looking at the world.
Hayek's essay was formative for me, and so far (I'm about halfway through the book), Sowell improves and expands upon it immensely through example and clearer prose.
The gist of the book is squarely in Sowell's wheelhouse — knowledge and decisions exist on an incremental continuum, trade-offs underpin everything:
The most foundational principle of the book: the core use of information is to make trade-offs. You can distinguish categorical from incremental decisions, Sowell prefers the latter.
Tom Sowell’s Visions trilogy (Conflict of Visions, The Vision of the Anointed, The Quest for Cosmic Justice) is still my favorite of his works, but this one is giving it a run for its money.
Media, Tech, and Business
🎮 A Primer on the Metaverse
Matthew Ball is the O.G. metaverse analyst, having spent the last few years writing about the threads that connect gaming, media, and the economics of each into a cohesive experience that transcends any individual category.
This primer touches on different aspects of the metaverse — hardware, networking, payments, content, and more. Highly recommended to understand why today's toys like Roblox and Fortnite have far more staying power than we might predict.
Now that Microsoft and Facebook are talking about metaverses in corporate keynotes, we'll be seeing serious increased experimentation on many of these ideas. And lets hope that doesn’t mean the term has jumped the shark.
💳 Stripe and Solid-State Economics
Software valuations are sky high, and tech businesses can grow at a clip unprecedented even a few years ago. One thing software uniquely enables that hasn't been possible in the past is how quickly solutions can be experimented with, and then eventually cemented into programmatic layers that automate steps of information exchange. If a process can be refined and exception-handled with enough detail, we can bake rules into "firmware", and in extreme cases, even cast certain repeatable processes into silicon.
Byrne Hobart wrote about this effect in the context of Stripe's business. Over time, Stripe continues to commoditize and systematize financial processes that used to be chock full of phone calls to the bank, fax machines, and days of waiting for approvals:
This is how software eats the world: by taking business functions one at a time, turning them into well-documented API calls with useful error messages (but infrequent errors) that can be chained together with arbitrary complexity and then run with minimal human involvement. The long-term dream is that, when you mouseover the "order now" button on an e-commerce site, a seamless chain of events updates the entire supply chain, and this tiny indication of incremental demand actually affects inventory restocking, hiring, and financial planning all the way down the line.
The second-order effects of advancements like this stand to be even more impactful than the first. If they're successful, we get more companies, more idea experimentation, more specialization, all with less overhead.
🔧 Small Tools for Shaping
I'll close with a tactical but excellent post from Ryan Singer, where he reviews some of his kit for working on shaping product ideas.
He runs through a number of tools and techniques that can be used at any stage of an ideation process. I'll certainly be keeping these on hand for projects we're working on.
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