The (de)centralization continuum

Internet visionaries are worrying about the increased centralization of the Internet. They worry about centralization of power as most of the value on the Internet is flowing to four big companies that go by the acronym FANG (Facebook, Amazon, Netflix and Google). Apple isn’t on the list because they make money by selling good ol’ hardware. (Moreover, FAANG doesn’t sound so cool).

Voices encouraging decentralization are strongest in Berlin, home to the majority of upcoming blockchain projects. Last week I was there attending the BlockStack Summit. If you go through my notes, you’ll know that almost all speakers believed how decentralization is the future of humanity. ...  Read the entire post →

Notes from Berlin on crypto and blockchain

I attended Blockstack Berlin event yesterday and here are my notes. In case you’re not very familiar with the cryptocurrencies or blockchain space, I recommend going through my reading list on bitcoin and ethereum first.

The Agenda

What attracted me to travel from Pune, India to Berlin, Germany was the impressive list of speakers. I was specifically interested in listening to Edward Snowden (the famous whistleblower), Nick Sbazo (creator of bitgold, precursor to bitcoin), and Albert Wenger (author of world after capital). ...  Read the entire post →

Organizations are habit maximization machines

Have you seen this famous video on Youtube where one guy dances and it keeps on attracting other people to join him? Soon enough this one person’s weird dance is a group dancing together. In case you haven’t, check it out (it’s just 3 minutes long):

Organizations grow similarly. Whether the founding team intends to or not, every startup project ends up acquiring cult-like habits. Here’s how that happens.

What makes company cultures different from each other?

Imagine your name is Paras and you’re the founder of a startup project (it could be a company, a non-profit, a religion or even a country). You have a weird habit: you like to come to office by noon and stay late (say until 8pm). You hire your first employee, and on the first day he comes to office at 9am (just like he did in his previous job). The empty office seems odd to him, and it becomes odder still when he sees you stroll by in office during his lunchtime. In the evening, since it’s the first day of his job, he waits for you to leave but the entire time, you are happily busy on your laptop. You leave office by 9pm and a couple of minutes after you, the new hire leaves. Thinking of his first day as a fluke, the new employee comes in early again tomorrow but the same thing repeats.  ...  Read the entire post →

Reliably detecting humans on the Internet

1/ There’s ONE big unsolved problem for anyone who’s interested: detecting humans on the Internet.

It has potential to unlock billions of dollars of value. Here’s how.

2/ Today, some of the biggest tech companies (Google, Facebook, Twitter) make billions of dollars by monetising human attention.

Digital ad industry is total of $280Bn.

3/ The reason Facebook, Google make this amount of money is because their algorithms for detecting bots are closed source.

There’s a continual arms race between click-farms / bot-makers and bot detecting algorithms at these companies. ...  Read the entire post →

Reading Recap #4: The many wonders of prediction markets

Last week, after reading about governance systems that improve upon democracy, I went deeper into market-based approaches of making policy decisions. Markets and governance seem two very different things, but as you will see in this article, there are benefits of taking good ideas from both combining them.

When you consider democracy, think about a group of people with different educational backgrounds, different interest levels and, most importantly, different preferences (some like guns and some don’t). Now, all members of this disparate group decide equal votes is a good idea and what they get is an average opinion that nobody likes. That’s democracy in a nutshell. ...  Read the entire post →

Businesses get killed by non-competitors

Entrepreneurs worry about competition all the time. And they’re correct in doing so. I think the “focus on customers, ignore competition” is a terrible business advice. Customers will never ask you to introduce switching costs, yet that’s precisely what businesses should do in order to be profitable for a non-trivial amount of time.

In my last article, I wrote about how an entrepreneur should go about creating a legal monopoly via network effects and economic moats. In this article, I’ll talk about how even legal monopolies get killed.  ...  Read the entire post →

How to create legal monopolies via network effects and economic moats

If there’s one thing that customers dislike, it’s the barriers in switching between competitive products. As customers, we want to retain our freedom. However, as entrepreneurs, we are incentivized to curtail that freedom. As I wrote earlier, head to head competition in a market pushes profits to zero. To make a profit, an entrepreneur needs to find a way to keep customers and competition away from each other.

There are two ways this separation can happen:

  • Prevent competition from entering into your market
  • Prevent customers from switching to a competitor

Obviously, these tasks are hard in a free market (and that is why market pays through the roof for companies with a sustainable competitive advantage). Unless you sell drugs, you can’t (and shouldn’t) hire an assassin to prevent competition. Nor, can you (and should you) threaten your customers with dire consequences if they switch. ...  Read the entire post →

Reading Recap #3: Governance systems beyond democracy

Anybody who has thought about democracy even one level deep knows that a decision taken by the majority vote isn’t always a good decision. For issues of importance, such as Britain’s participation in EU or global warming, most people do not have the necessary background knowledge or motivation to cast an informed vote.

Any scientist can tell you that just because you had snow in your area, it doesn’t mean global warming is false. Most people care only about immediate and local issues, and good policies usually require second or third order analysis that’s hard to do and even harder to explain.  ...  Read the entire post →

Bitcoin’s value beyond hype

A product or a service creates value when it solves a human need. When Amazon was founded, it was a lifesaver for book lovers in remote places where they didn’t have good bookstores. People of the world allowed Jeff Bezos to become rich because he made their life simpler. We happily exchange money for services when it enables us to make our lives better. Librarians help others but scientists help themselves. Guess who makes more money?.

Just like Amazon solves a real-world need, so does Bitcoin. (Of course, like Amazon stock, people speculate on Bitcoin’s price as well.) What needs does bitcoin solve for? The answer to that is long-winded. The network effects and feedback loops in bitcoin ecosystem make teasing out the value question really difficult, but I’ll try doing that here. ...  Read the entire post →

Bitcoin is mother of all network effects

Bitcoin is such a strange beast that it’s hard to really understand what it really is. Some people call it the biggest Ponzi scheme ever invented, while others see it as the currency that’ll power a decentralized, libertarian utopia. Whatever it is in reality (and whatever “reality” really means), there is no question that network effects are playing a central role in making it the most hotly debated idea of recent times.

I’m a big fan of the power of network effects and have previously written about different types of network effects. In this post, I want to talk about what network effects are at play in bitcoin. This post assumes you know what bitcoin is and how it works at a high level. In case you don’t, go through my introductory post on basics of bitcoin first...  Read the entire post →