## Metadata

- Author: [[Chris Dixon]]

- Full Title: Read Write Own

- Category: #books

## Highlights

- The internet got intermediated, in other words. The network went from permissionless to permissioned.

- Search and social ranking algorithms can change lives, make or break businesses, and even influence elections, yet the code that powers them is controlled by unaccountable corporate management teams and hidden from public scrutiny.

A subtler and equally troubling point is how these power brokers architect their networks to restrict and constrain startups, impose high rents on creators, and disenfranchise users. The negative effects of these design choices are threefold: (1) they stifle innovation

; (2) they tax creativity; and (3) they concentrate power and money in the hands of a few.

- Either way, whatever your stance, one trend is undeniable: centralizing forces are drawing the internet inward, collecting power into the center of what was supposed to be a decentralized network. This inward turn is stifling innovation, making the internet less interesting, less dynamic, and less fair.

- Note: [[centralization]] [[decentralization]]

- So yes, blockchains create networks, but unlike other network architectures-and here's the key point-they have more desirable outcomes. They can incentivize innovation, reduce taxes on creators, and let the people who contribute to the networks share in decision making and upside.

….

Blockchain networks combine the societal benefits of protocol networks with the competitive advantages of corporate networks.

Software developers get open access, creators get direct relationships with their audiences, fees are guaranteed to stay low, and users get valuable economic and governance rights. At the same time, blockchain networks have the technical and financial capabilities to compete with corporate networks.

Blockchain networks are a new construction material for building a better internet.

- Note: [[blockchain]]

- Network effects take small advantages and snowball them into avalanches. When corporations are in control, they tend to guard their advantages jealously, making it difficult for anyone to leave. If build an audience on a corporate network, leaving means for feiting your audience, so you're discouraged from doing so. This partly explains why power has consolidated into the hands of a few large tech companies.

If this trend continues, the internet could end up even more centralized, commandeered by powerful intermediaries that use their might to crowd out innovation and creativity. Left unchecked, this will lead to economic stasis, homogeneity, unproductivity, and inequality.

- Note: [[network effects]]]

- Outside-in technologies are much harder to see coming, and they're routinely underestimated. (Page 53)

- Corporate services like Facebook and Twitter operate networks that interoperate with the web, using components like HTTP, but they are not part of the web in any meaningful sense. They do not adhere to the web's entrenched customs and norms. Indeed, they break the web's many technical, economic, and cultural tenetslike openness, permissionless innovation, and democratic governance. These centralized networks are essentially separate networks that sit adjacent to the web. They have their own rules, economics, and network effects.

- People use new technologies in one of two ways: (1) to do something they could already do but can now do faster, cheaper, easier, or higher quality; or (2) to do something brand-new that they simply couldn't do before. Early in the development of new technologies, the first category of activities tends to be more popular, but it's the second set that has more lasting effects on the world.

- Over time, the best entrepreneurs, developers, and investors become wary of building on top of corporate networks. Decades of evidence show that doing so will end in disappointment. It's impossible to quantify how much innovation this has cost the world.

- Note: [[monopoly]]

- Companies that control networks have complete control of accounts, ratings, social relationships, and more. User ownership in corporate networks is an illusion.

Blockchains shift control to software governed by immutable code, not people, and thereby make ownership real.

- Note: [[ownership]]

- Most of today's NFTs act more like signed copies, analogous to autographed paintings or record albums. The value of an artwork depends on many things, including its scarcity and critical appraisal, but it also depends on some complex mix of social and cultural signals. People assign financial premiums beyond utility value to many things, including art, baseball cards, handbags, sports cars, and sneakers. Similarly, people can assign premiums to tokens that represent objects with cultural or artistic significance. Value is a function of many factors, some objective and some subjective.

- Note: [[value]]

- When disruptive technologies debut, they're often dismissed as toys because they undershoot user needs.

- Note: [[disruptive]]

- __Disruptive products ride exponential forces that cause them to improve at surprising rates. Products that get better incrementally are not disruptive. Bit-by-bit improvements yield weak forces. Exponential growth comes from stronger forces that have compounding effects, including network effects and platform-app feedback loops.__ Software composability-a property describing code that is reusable so developers can more easily extend, adapt, and build on what exists-is another source of exponential growth.

(Much more on this in "Community-Created Software.")

__The other critical feature of disruptive technologies is that they are misaligned with incumbent business models.__ (I discuss in detail how tokens fit this mold in part 5, "What's Next.") You can be sure that Apple is working on phones with better batteries and cameras. It would be foolish for a startup to try to compete with the company on that basis. Apple knows that improving its phones will make the phones more valuable and help it grow its core business: selling phones. A more interesting startup idea would be something that makes phones less valuable. This is something Apple is far less likely to pursue.

__A product doesn't have to be disruptive to be valuable, of course.__ There are plenty of products that are useful from day one and continue being useful long-term. These are what Christensen calls sustaining technologies.

- Note: [[disruptive]]

Disruptive technologies are, by definition, harder to spot than sustaining ones.

They elude experts and that's the point. Incumbents missing disruptive innovation is what makes it disruptive.

- Note: [[disruptive]]

- Even after accounting for their creator funds, the biggest social networks share almost nothing with network participants. This is great for the networks, but not for creators, who provide content without receiving their fair share of revenue in return. On the other side of the networks, these companies use their leverage to extract personal user data instead of money, which helps them earn more through better ad targeting. Network effects with lockin amplify pricing power.

- __Thus, corporate network owners not only suck up almost all network revenue, but they find ways to extract additional fees on top of that.__ Network participants get left high and dry. They spend years cultivating followings; then the rules change, and they are forced to pay even more to reach the audiences they built.

__Big Tech's high take rates are bad for network participants, but they're great for their own profit margins.__ Meta has gross margins of over 70 percent, meaning that for every dollar in sales, it keeps more than 70 cents for itself (with the remainder paying costs related directly to revenue generation, like running data centers). Big Tech companies that own networks spend some of this windfall on fixed costs such as head count and software development. They realize the rest as profit. Inside these companies, thousands of employees work in management and sales, and some work on new R&D projects. But they also have layers of middle managers and wasteful bureaucracy enabled by the excess.

__Where bean counters see fat margins, entrepreneurs should see blood. Your take rate is my opportunity, as Bezos might say.__

- Note: [[take rate]]

- __Social networks squeezed the balloon in a way that stifles innovation.__

__The same is true for modern financial networks. Payments should be an easy and inexpensive commodity, a basic utility, like sending email.__ We have the technology to do it, as we'll cover in "Making Financial Infrastructure a Public Good." This would make payments a thin layer in the finance and commerce stack.

Today, it's inverted: there are some very profitable payments companies, and the field remains an active area of entrepreneurship where startups and venture capital are lured by the industry's persistent take rates. __Again, the balloon got squeezed in the wrong places.__

- Low take rates have a multiplier effect. More money to the edges of the network means more people reach an income level where they can pursue creative work full-time. The two-tier class system that divides creators and users on most social networks would become more permeable. Barriers to social mobility would ease as more users could build sustainable media enterprises of one. Meanwhile, full-time work would result in better-quality content for others to consume, attracting larger audiences and generating more income across the network.

__Better economics for creators leads to a virtuous cycle.__

- Fortunately, value doesn't disappear. As the balloon gets squeezed, value shifts to adjacent layers, as covered in "Take Rates."

Chess-playing AI has trounced humans for two decades, yet playing and watching chess on websites like chess.com is more popular than ever. People crave human interaction despite the rise of machine intelligence. Post-AI artistic expression will focus less on the media itself and more on the curation, community, and culture around it.

NFTs add layers of scarce value onto a sea of abundant media.

- I have presented what I think are some of the best ideas for developing blockchain networks today, but entrepreneurs are better at building the future than people like me are at predicting it.

Most likely, the best ideas either seem strange today or are yet unimagined. If you are used to participating in blockchain networks, you are used to people looking at you funny or thinking what you do is silly or a scam. Often there aren't names for what you're working on. __Inside-out technologies arrive nicely packaged, ready for the market. Outside-in technologies arrive messy, mysterious, disguised as something else. Grasping their potential takes work.__

- Note: [[outside-in]]## Metadata
- Author: [[Chris Dixon]]
- Full Title: Read Write Own
- Category: #books

## Highlights

- The internet got intermediated, in other words. The network went from permissionless to permissioned.

- Search and social ranking algorithms can change lives, make or break businesses, and even influence elections, yet the code that powers them is controlled by unaccountable corporate management teams and hidden from public scrutiny.

  A subtler and equally troubling point is how these power brokers architect their networks to restrict and constrain startups, impose high rents on creators, and disenfranchise users. The negative effects of these design choices are threefold: (1) they stifle innovation
  ; (2) they tax creativity; and (3) they concentrate power and money in the hands of a few.
- Either way, whatever your stance, one trend is undeniable: centralizing forces are drawing the internet inward, collecting power into the center of what was supposed to be a decentralized network. This inward turn is stifling innovation, making the internet less interesting, less dynamic, and less fair.
    - Note: [[centralization]] [[decentralization]]

- So yes, blockchains create networks, but unlike other network architectures-and here's the key point-they have more desirable outcomes. They can incentivize innovation, reduce taxes on creators, and let the people who contribute to the networks share in decision making and upside.
  ….
  Blockchain networks combine the societal benefits of protocol networks with the competitive advantages of corporate networks.
  Software developers get open access, creators get direct relationships with their audiences, fees are guaranteed to stay low, and users get valuable economic and governance rights. At the same time, blockchain networks have the technical and financial capabilities to compete with corporate networks.
  Blockchain networks are a new construction material for building a better internet.
    - Note: [[blockchain]]
- Network effects take small advantages and snowball them into avalanches. When corporations are in control, they tend to guard their advantages jealously, making it difficult for anyone to leave. If build an audience on a corporate network, leaving means for feiting your audience, so you're discouraged from doing so. This partly explains why power has consolidated into the hands of a few large tech companies.
  If this trend continues, the internet could end up even more centralized, commandeered by powerful intermediaries that use their might to crowd out innovation and creativity. Left unchecked, this will lead to economic stasis, homogeneity, unproductivity, and inequality.
    - Note: [[network effects]]]

- Outside-in technologies are much harder to see coming, and they're routinely underestimated. (Page 53)

- Corporate services like Facebook and Twitter operate networks that interoperate with the web, using components like HTTP, but they are not part of the web in any meaningful sense. They do not adhere to the web's entrenched customs and norms. Indeed, they break the web's many technical, economic, and cultural tenetslike openness, permissionless innovation, and democratic governance. These centralized networks are essentially separate networks that sit adjacent to the web. They have their own rules, economics, and network effects.

- People use new technologies in one of two ways: (1) to do something they could already do but can now do faster, cheaper, easier, or higher quality; or (2) to do something brand-new that they simply couldn't do before. Early in the development of new technologies, the first category of activities tends to be more popular, but it's the second set that has more lasting effects on the world.

- Over time, the best entrepreneurs, developers, and investors become wary of building on top of corporate networks. Decades of evidence show that doing so will end in disappointment. It's impossible to quantify how much innovation this has cost the world.
    - Note: [[monopoly]]

- Companies that control networks have complete control of accounts, ratings, social relationships, and more. User ownership in corporate networks is an illusion.
  Blockchains shift control to software governed by immutable code, not people, and thereby make ownership real.
    - Note: [[ownership]]

- Most of today's NFTs act more like signed copies, analogous to autographed paintings or record albums. The value of an artwork depends on many things, including its scarcity and critical appraisal, but it also depends on some complex mix of social and cultural signals. People assign financial premiums beyond utility value to many things, including art, baseball cards, handbags, sports cars, and sneakers. Similarly, people can assign premiums to tokens that represent objects with cultural or artistic significance. Value is a function of many factors, some objective and some subjective.
    - Note: [[value]]

- When disruptive technologies debut, they're often dismissed as toys because they undershoot user needs.
    - Note: [[disruptive]]

- __Disruptive products ride exponential forces that cause them to improve at surprising rates. Products that get better incrementally are not disruptive. Bit-by-bit improvements yield weak forces. Exponential growth comes from stronger forces that have compounding effects, including network effects and platform-app feedback loops.__ Software composability-a property describing code that is reusable so developers can more easily extend, adapt, and build on what exists-is another source of exponential growth.
  (Much more on this in "Community-Created Software.")
 
  __The other critical feature of disruptive technologies is that they are misaligned with incumbent business models.__ (I discuss in detail how tokens fit this mold in part 5, "What's Next.") You can be sure that Apple is working on phones with better batteries and cameras. It would be foolish for a startup to try to compete with the company on that basis. Apple knows that improving its phones will make the phones more valuable and help it grow its core business: selling phones. A more interesting startup idea would be something that makes phones less valuable. This is something Apple is far less likely to pursue.

  __A product doesn't have to be disruptive to be valuable, of course.__ There are plenty of products that are useful from day one and continue being useful long-term. These are what Christensen calls sustaining technologies.
    - Note: [[disruptive]]
    Disruptive technologies are, by definition, harder to spot than sustaining ones.
  They elude experts and that's the point. Incumbents missing disruptive innovation is what makes it disruptive.
    - Note: [[disruptive]]

- Even after accounting for their creator funds, the biggest social networks share almost nothing with network participants. This is great for the networks, but not for creators, who provide content without receiving their fair share of revenue in return. On the other side of the networks, these companies use their leverage to extract personal user data instead of money, which helps them earn more through better ad targeting. Network effects with lockin amplify pricing power.

- __Thus, corporate network owners not only suck up almost all network revenue, but they find ways to extract additional fees on top of that.__ Network participants get left high and dry. They spend years cultivating followings; then the rules change, and they are forced to pay even more to reach the audiences they built.


  __Big Tech's high take rates are bad for network participants, but they're great for their own profit margins.__ Meta has gross margins of over 70 percent, meaning that for every dollar in sales, it keeps more than 70 cents for itself (with the remainder paying costs related directly to revenue generation, like running data centers). Big Tech companies that own networks spend some of this windfall on fixed costs such as head count and software development. They realize the rest as profit. Inside these companies, thousands of employees work in management and sales, and some work on new R&D projects. But they also have layers of middle managers and wasteful bureaucracy enabled by the excess.
  __Where bean counters see fat margins, entrepreneurs should see blood. Your take rate is my opportunity, as Bezos might say.__
    - Note: [[take rate]]

- __Social networks squeezed the balloon in a way that stifles innovation.__
  __The same is true for modern financial networks. Payments should be an easy and inexpensive commodity, a basic utility, like sending email.__ We have the technology to do it, as we'll cover in "Making Financial Infrastructure a Public Good." This would make payments a thin layer in the finance and commerce stack.
  Today, it's inverted: there are some very profitable payments companies, and the field remains an active area of entrepreneurship where startups and venture capital are lured by the industry's persistent take rates. __Again, the balloon got squeezed in the wrong places.__

- Low take rates have a multiplier effect. More money to the edges of the network means more people reach an income level where they can pursue creative work full-time. The two-tier class system that divides creators and users on most social networks would become more permeable. Barriers to social mobility would ease as more users could build sustainable media enterprises of one. Meanwhile, full-time work would result in better-quality content for others to consume, attracting larger audiences and generating more income across the network.
  __Better economics for creators leads to a virtuous cycle.__

- Fortunately, value doesn't disappear. As the balloon gets squeezed, value shifts to adjacent layers, as covered in "Take Rates."
  Chess-playing AI has trounced humans for two decades, yet playing and watching chess on websites like chess.com is more popular than ever. People crave human interaction despite the rise of machine intelligence. Post-AI artistic expression will focus less on the media itself and more on the curation, community, and culture around it.
  NFTs add layers of scarce value onto a sea of abundant media.

- I have presented what I think are some of the best ideas for developing blockchain networks today, but entrepreneurs are better at building the future than people like me are at predicting it.
  Most likely, the best ideas either seem strange today or are yet unimagined. If you are used to participating in blockchain networks, you are used to people looking at you funny or thinking what you do is silly or a scam. Often there aren't names for what you're working on. __Inside-out technologies arrive nicely packaged, ready for the market. Outside-in technologies arrive messy, mysterious, disguised as something else. Grasping their potential takes work.__
    - Note: [[outside-in]]