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Now that the hardcover window has passed, and since people don't read, here's a Tweetstorm summary of Status as a Service, which I'll abbreviate as StaaS (h/t @naval) to disambiguate from SaaS. eugenewei.com/blog/2019/2/19…
A whole class of companies are better understood as Status as a Service (StaaS) businesses. This is especially true of social networks.
Status as a Service businesses are best analyzed along dimensions of social capital. They build off two principles:
* People are status-seeking monkeys
* People seek out the most efficient path to maximizing status
* People are status-seeking monkeys
* People seek out the most efficient path to maximizing status
Social networks can be analyzed along three dimensions of competitive advantage: social capital, utility, and entertainment. To build off traditional network effects theories, it's easier to focus on the first two.
Social media is analogous to crypto:
1. A new social network issues new status token
2. Users mine tokens through Proof of Work
3. Over time, it becomes harder to mine new tokens, creating built-in scarcity of status.
4. Old people hate social media and crypto.
1. A new social network issues new status token
2. Users mine tokens through Proof of Work
3. Over time, it becomes harder to mine new tokens, creating built-in scarcity of status.
4. Old people hate social media and crypto.
All StaaS businesses have their own Proof of Work to enforce scarcity of status. Clever lip synch and dance number on Musical.ly/TikTok, short quip on Twitter, beautiful photo on Instagram, insightful answer on Quora, etc.
Proof of Work is critical in StaaS business because it defines the scoreboard which users compete on. It separates users by their skill at that Proof of Work and creates a relative status ladder.
Early Twitter was a lot of dull life updates (my first tweet was "Doing my taxes"). Then Favstar and Favrd came along and provided a global scoreboard for all to see. This launched comedy Twitter. The entire tone of content on the service changed.
Prisma was a magical photo filter app that applied fine art styles to any photo. But that was a poor Proof of Work because the skill was all in the filter, not in the photographer. So the Prisma social network was doomed as a status game.
Facebook had one of the greatest founding Proof of Work filters of all time: you had to have a Harvard .edu email address. @byrnehobart theorizes that the cooler the early adopters, the faster and longer it can grow, or what he calls the glide path theory: medium.com/@byrnehobart/b…
Since people seek out the most efficient way to maximize status, they are very sensitive to the ROI on their Proof of Work on different social networks, which control that through its distribution mechanisms: resharing, hashtag spamming, recommendations, etc.
TikTok is intriguing as a social network that leans heavily on a video algorithm to distribute its best content, not on the shape of the follower graph. That allows it to reward new creators who don't have large followings yet.
Durable status games need mechanisms to reward new and skilled users so that more experienced users don't dominate. Need mechanisms to clear out "old money" that has stagnated, to make way "new money."
Silicon Valley has much less old money than New York. That's probably healthy as inherited generational wealth tends to sap ambition.
Copying Proof of Work in StaaS businesses tends to fail because they duplicate an existing status game of an incumbent, just with a non-existent graph. A duplicate status token with much less liquidity is worthless. Witness Twitter knockoffs like Mastodon, App.net
Copying Proof of Work can be easily countered by incumbents who copy any new features from challengers. Tencent tried knocking off Douyin (Chinese TikTok) but added a side by side response feature. Douyin just copied that and now it's beloved feature for them.
The greatest social capital explosion in history was the launch of Facebook's News Feed. It simultaneously increased efficiency of distribution of posts while pitting all of them against each other in a global, unified status competition.
People are fast learners when given instant feedback. Social networks like Facebook, Twitter, and Instagram provide constant scoring on every post, powering a feedback loop that has created a generation of expert signalers.
An app like Path tried to limit your graph to 150 followers, the Dunbar number. Putting an artificial ceiling on social capital, given the insatiable human appetite for status, was a non-starter. RIP Path, you'll always have the floating action button.
New StaaS businesses tend to be adopted first by the young. They are more social capital poor than adults, and they have much more of something adults tend to lack, and that is free time.
Young people juggle multiple identities in parallel status games. One persona at school, one at home with family, one with boyfriend/girlfriend, etc. They often need to abandon identities. A single identity network like Facebook is not a great fit for them.
Social networks tend to optimize first for either social capital or for utility, then try to improve on the other dimension.
Networks that offer utility first and then social capital is best summarized by @cdixon's "Come for the tool, stay for the network." Instagram had good filters, eventually the app grew to become a thriving photo sharing community.
Networks that offer social capital first and later utility is the arc traveled by companies like Quora, Wikipedia, Reddit. Content coverage was sparse in the beginning, but the ego boost of contributing turned them into massive information resources.
Have hit limit of Twitter Thread feature, LOL. To be continued in my next tweet.
This tweetstorm continues in Part 2 here:
