Thread by @astralwave

This is definitely something I’ve observed in tech startups.

Startups have so much leverage thanks to the power of software, and the presently high familiarity & penetration of mobile computing + the Web.

But most of this leverage is heavily misapplied & constrained by Capital.

https://twitter.com/solarpunk_girl/status/1458197852501458953

Not talking about financial leverage here, of course, but intellectual leverage.

What a small insight & a little code can do to change lives at a large scale.

But if it doesn’t fit into the OKR & investment thesis, good luck trying to do it.

Procrustean Bed?

Why so much of this “small insight & little code” lives on the fringes of the Web in open source software, small indie shops, and early startups (before GPs’ investment theses corrupts product strategy).

It’s not “coordination headwinds”, it’s the Principal-Agent Problem.

The Principal is meant to be the user & customer, not the investor.

But we know intuitively where incentives are aligned. If the CEO wants it, it gets done. But why does the CEO want it?

Part of why crypto projects drew me in at first is the promise of how tokens & DAOs can align incentives between customers & owners.

If the user owns the protocol, the agent (the developers & designers of said protocol) can leverage a little insight and a little code for good.

But recently we’ve seen another Procrustean Bed scenario emerge with crypto products & protocols.

Once people are aware they can invest by being a user, investors started positioning themselves as users too, presenting a new Principal-Agent Problem.

Trying out multiple crypto products & protocols speculatively just so you can profit from a potential airdrop of governance tokens?

Buying governance tokens speculatively because you think price will appreciate, but you’re not a user of the product/protocol?

Procrustean Beds.

A Procrustean Bed:
“an arbitrary standard … used to measure success, while completely disregarding obvious harm that results from the effort”

i.e. The measure becomes the goal.

If investors care about “FinTech” & “Web3” and have a time horizon of 3 years, that becomes the goal

In crypto, this Procrustean measure tends to be TVL or token price.

It goes without saying that decentralization (from potentially adversarial middlemen) is the goal, not “number go up”.

But many in crypto have lost their way.

Now that we know making users investors doesn’t necessarily align incentives, it begs the question: how do we design economic systems that do?

As before, there were solutions to Byzantine’s Generals & Sybil attacks.

Could we hope for one to the Principal-Agent Problem?

Not a Procrustean Bed, but it turns out the Sovereign Individual Thesis is another one that the latest boom in crypto has falsified.

“Self-sovereignty” was the drumbeat for so long.

Now that it’s been falsified, it all feels so hollow.

All utopias end this way, I guess. 🤷‍♂️

https://twitter.com/astralwave/status/1453669251248758786

Still optimistic about web3, but my optimism has definitely evolved to be more even-keeled and less naïve.

I no longer think crypto can solve society’s coordination problems.

But I think the new tech can be successful in specific contexts, like funding digital public goods.

Or in providing a layer of artificial scarcity that results in digitally-native securities.

Which help us coordinate global commerce that transcends national jurisdictions.

As long as the SEC doesn’t think it’s a security, we’re fine.

https://twitter.com/astralwave/status/1458192564801179656

Back to Procrustean Measures:

As the tech industry’s recent outing with crypto has shown, making certain financial measures the goal might lead to negative externalities, but they can also lead to positive ones.

Digitally-native public goods & global commerce are net good.