Based on the numbers, my view is that this third dollar spike likely ends when the Federal Reserve expands its monetary base by trillions of dollars to fund U.S. government deficits over the next several years, for lack of sufficient foreign and private buying of that debt. If performed at sufficient scale, this would loosen the global dollar liquidity shortage.

Imagine, as an extreme example, that the entire world had to use Swiss francs for its international transactions and commodity purchases. It simply wouldn’t work, because there isn’t enough money supply from that small country for the whole world to use. It’s not liquid enough; there aren’t enough francs. The current system is running into that issue, where the United States, as large as it is, is a diminishing share of global GDP, global money supply, and global commodity demand. But, the world is still constrained by dollars, so there are growing pains. The dollar likely does not currently have enough liquidity to serve as the sole global reserve and commodity-pricing currency; there aren’t enough dollars.

The world is now outgrowing the dollar in terms of scale, but still uses the dollar as the global currency. The network effect (and U.S. military force) makes it very hard to shift away to a new system. The United States was 20% of global PPP GDP back in 2000, but only 15% of global PPP GDP today, according to the World Bank. The world’s biggest consumer of commodities during the past decade has been China, not the United States.

In other words, after Argentina and Turkey, the United States is ironically the country that “broke” next in this strong dollar environment, and began monetizing its government debt due to an acute dollar shortage. Fortunately for the United States, it can print its own dollar-denominated liabilities, so its break is less spectacular and more manageable than countries with dollar liabilities that can’t print dollars.

So, rather than sucking existing dollars out of the system as they were from 2015-2019, newly-issued Treasuries are now being funded by newly-created dollars, which means less or no liquidity drain.

In other words, while there is significant foreign demand for dollars (especially to service the aforementioned dollar-denominated debts), there is not a big foreign demand for Treasuries. That’s a key distinction, and that’s what generally happens when the dollar is strong. When the dollar starts rising into a spike, foreigners hold less and less of the debt, as marked in the chart above. This has happened in all three dollar spikes. However, it matters more this time because U.S. federal debt as a percentage of GDP is far larger than it used to be, the U.S. has been more reliant on foreign funding in recent decades.

Foreign central banks mainly accumulate foreign-exchange reserves (i.e. buy Treasury notes and bonds) during weak dollar environments, not strong dollar environments like we’re in now. During a strong dollar environment, they rely on their Treasury reserves to protect their currency and service their dollar-denominated debts if need be. Think of it like a squirrel collecting nuts in the summer to consume during the winter. Squirrels don’t collect nuts in the winter, and foreign central banks don’t buy Treasuries when the dollar is strong and strengthening

The U.S. government increased its debt levels by $4.6 trillion from 2015 through 2019, but foreigners only bought $700 billion of that, and almost all of that was private investors during a brief period in the first 2/3rds of 2019.

While the strong dollar gives U.S. consumers more buying/importing power, it makes U.S. products and services more expensive, and thus less competitive in the export market. Basically, it helps some groups live above their means (and U.S. asset prices have been doing great), but it hollows out the U.S. manufacturing sector and negatively affects the blue collar workforce the most.

Each of these three dollar spikes over the past five decades caused harm to the global financial system at a lower level of dollar strength than the previous spike, resulting in either a planned correction or a self-correction towards a weaker dollar. There are likely two main reasons for this. Firstly, global trade accounted for a larger and larger share of global GDP in each of the three spikes (the first one less than 40%, the second one around 50%, and the third one around 60%, as previously mentioned). Secondly and perhaps more importantly, U.S. and foreign markets have had increasingly high debt-to-GDP ratios over the decades. With more leverage in the system, and with more connectivity between economies, it takes smaller currency fluctuations for something to break.

The reason that the Fed was able to raise interest rates so sharply, and for the dollar to get so strong, was that there was less debt in the global system, and especially in the U.S. system, relative to GDP. The U.S. government and U.S. companies could handle higher interest rates on their debt, because their overall debt levels were low relative to their income levels. In addition, global trade as a percentage of global GDP was less than 40%, compared to 50% a couple decades later, and up to 60% recently. So, in addition to being way less indebted, countries were a significantly less interconnected.

Ironically, the more dollar-denominated debt there is in the world, the more demand there is for dollars, because those borrowers need dollars to service their dollar-denominated debts. That can push up the value of the dollar and further hurt dollar borrowers. It can have short squeeze characteristics, in other words.

The risky part of this system is that many foreign governments and corporations borrow in dollars, even though most of their revenue is in their local currencies. The lender of those dollars is often not even a U.S. institution; foreign lenders often lend to foreign borrowers in dollars. This creates currency risk for the borrower, a mismatch between their revenue currency and their debt currency. They do this because the borrower can get lower interest rates by borrowing in dollars rather than their local currency, thus taking on currency risk themselves instead of the lender taking on that risk. Sometimes, dollar-denominated bonds and loans are the only option for them. By doing this, the borrower is basically shorting the dollar, whether they want to or not. If the dollar strengthens, they get hurt, because their debts rise relative to their local-currency income. If the dollar weakens, they get a partial debt jubilee, because their debts fall relative to their local-currency income.

Copper inventories at the LME have been falling for some time. Demand for copper is growing as the economy recovers and the automotive market shifts toward electric vehicles. New supply for copper is coming online slowly, mostly due to regulatory and political challenges in copper-rich regions. If you were foolish enough to short copper with these market dynamics, punishment should have been swift. If you were shrewd enough to take the other side of the trade, rewards should have been realized.Instead, the LME engaged in temporary price suppression.

Let’s deconstruct what happened. Below is the 3-month spread chart for copper. Essentially, somebody was caught naked short and could not make delivery. They collected money from another trader at some point in the past on the promise that they would have copper to give them, but when the time came, they couldn’t make good on their contractual obligations. The price of copper for immediate delivery skyrocketed compared to the price of copper for delivery in three months. Traders call this situation backwardation and view it as a sign of extreme tightness in the physical market.

On Monday, April 20, 2020, the price of oil fell to minus $37.63 a barrel. How did this happen? Somebody was long an oil contract and was obligated to take physical delivery. They had no place to put it. Somebody else had the ability to take physical delivery at that moment in time and demanded $37.63 a barrel to do so. To use language the apes at WallStreetBets might understand, somebody got caught naked long and the market taught that person a severe lesson.

Let’s look at it another way. Assume you believe, like I do, that gold is the only real money. How much gold buys you a barrel of oil? Today, it is a shockingly low amount – only 0.036 ounces. Yes, you read that correctly. Roughly 1 gram of gold does the trick. When oil was trading at $145 in mid-2008, its price in gold was 0.15 ounces. With gold now trading at $1,900 an ounce, that works out to about $285 a barrel oil.

We are now ready to put the prices for natural gas in the chart above into shocking context. On an energy-contained-in-oil-equivalency basis, natural gas prices reached the following levels in February:            SoCal Citygate: $835 per barrel            Chicago Citygate: $752 per barrel            Houston Ship Channel: $2,320 per barrel            Waha: $1,196 per barrel            OGT: $6,919 per barrel            Henry Hub: $137 per barrel            Agua Dulce: $528 per barrel

There are at least four forces aligning as huge tail winds for fossil fuel prices. First, and most important, the ESG/progressive crowd has utterly and totally won the narrative war and they will press the consequence of their undeniable victory to the maximum by attacking supply at every opportunity. Second, the fossil fuel industry is coming off a period of extended underinvestment in capital projects already, which was exacerbated by the fallout from the COVID-19 crisis. Third, massive monetary and fiscal stimulus is stoking demand for commodities globally, and fossil fuels will not be exempt (on the contrary, since fossil fuels are critical to the production of other commodities, they will feel an amplified effect of this phenomenon). Finally, and related to the third force, fiat currencies are being debased at an unprecedented rate.

So how can we compare these prices to the price of oil? One of the problems with comparing quoted prices for different sources of energy is they are priced in different units, which is mostly an accident of history. For example, natural gas is priced in dollars per million British thermal units (BTUs), whereas oil is priced in dollars per barrel (a barrel being 42 gallons), and gasoline is priced in dollars per gallon (a gallon being a gallon). Habits are hard to break. To create an apples-to-apples comparison of what these prices mean, a useful trick is to first levelize everything to millions of BTUs, which is how natural gas is sold anyway, and it just happens to be a direct measure of the inherent energy content embedded in a fuel. A standard barrel of oil contains 5.8 million BTUs. If you take the current price of oil (in dollars per barrel) and divide it by the current price of natural gas (in million BTUs), you’ll almost always get a number higher than 5.8, which makes sense because oil is generally more useful than natural gas and natural gas is often a byproduct of oil production. But on an energy-content-equivalency basis, 5.8 is the number. To put natural gas prices into an energy-contained-in-oil-equivalency basis, we simply do the reverse and multiply the price of natural gas, expressed in millions of BTUs, by 5.8.

Credit Where Credit is Due

Doctor Copper Is Sick

Tom Marzec-Manser, gas analyst at commodities data firm ICIS, said Europe would be left with a 13.5 billion-cubic-meter hole in supplies to fill if Russia keeps pumping about 67 million cubic meters of gas each day through Nord Stream, below the previously planned level of 167 million. That represents about 17% of the gas the EU aims to have stocked up by November.

The US is also more financialized than Europe in the sense that our stock market is big enough to affect our economy rather than just the other way around. We’re so consumption-oriented, stock-oriented, and reliant on the foreign sector recycling our trade deficits into our capital markets, that the “tail can actually wag the dog” in this sense.

In other words, liabilities are collateralized by other liabilities, all the way down.

In other words, claims for dollars (debt) grows far more quickly than the economy’s ability to generate dollars, and is far larger than the amount of dollars in existence. When this becomes too much of a problem, the amount of base money is simply increased by the central bank.

The credit-based global financial system we have constructed and participated in over the past century has to continually grow or die. It’s like a game of musical chairs that we have to keep adding people and chairs to in order for it to never stop. This is because cumulative debts are far larger than the total currency supply, meaning there are more claims for currency than there is currency. As such, too many of those claims can never be allowed to be called in at once; the party must always go on. When debt is too big relative to currency and starts to get called in, new currency is created, since it costs nothing other than some keystrokes to produce.

I use roughly 3-5 groups daily that usually consist of the same general web pages. Recreating a new group, typing the name, selecting the color, and manually opening and adding each tab to the group can be time-consuming. It would be amazing to save group names/colors in the chrome browser. Subsequently, being able to assign specific pages or bookmarks to each respective tab group would be a big time saver. Finally, setting specific tab groups and their designated tabs to open automatically upon launch of google chrome would be a welcome improvement. 

Dirty energy lobbyists claimed developing tar sands would protect our national energy security and bring U.S. fuel prices down. But environmental reviews by both the Obama and Trump administrations concluded that the Keystone XL pipeline would not have lowered gasoline prices. NRDC and its partners also found the majority of Keystone XL oil would have been sent to markets overseas—aided by a 2015 reversal of a ban on crude oil exports. This lines up with an industry trend: Oil and gas companies are exporting 8.4 million barrels of crude oil and refined fuels every single day. That’s up nearly threefold from a decade ago, and an amount equal to 42 percent of our consumption. And these exports are more than 10 times the capacity of the proposed Keystone XL pipeline.

But the even bigger challenge is getting the oil to refineries. Tar sands producers would love to send their oil to the upper Midwest, but those refineries are already saturated with domestic crude. They have no use for the cheap stuff from Alberta. That means the tar sands oil has to travel all the way to the Gulf of Mexico—more than twice the distance.

First you need to understand a bit about the economics of tar sands oil—a cheap, off-brand version of conventional crude. (You know a product is bad when it’s compared unfavorably to oil.) Refiners don’t particularly want tar sands oil, which is tougher to make into usable transportation fuel, so it sells for about $20 to $30 less per barrel than crude from Texas or the Dakotas. Therefore, if producers can’t make it on the cheap, they can’t afford to make it at all.

In a report published in April, Adamas said that the lack of new primary and secondary supply sources for rare earth oxides in the market from 2022 onwards, coupled with the inability of existing producers to increase their output, will create a major neodymium-praseodymium (NdPr) oxide shortage by 2035.   “If we consider that China is responsible for about 90% of the world’s neo magnet production today and 70% of the demand for those magnets exists in China, and then we consider…around one-third of the market to be unsatisfied by 2035, we can quickly begin to see the calculus that China is going to be faced with,” said Castilloux at a webinar on rare earths organized by BMO. 

Mountain Pass was idle with eight employees and on the brink of losing its permit. It was literally days away from being shut down permanently, which in hindsight, would have set the U.S. back decades.

I feel very comfortable stating that Mountain Pass is the most environmentally sustainable rare earth production site in the world. We have a dry tailings facility that eliminates the need for a wet tailings pond and the associated contamination risks. After it’s processed and the rare earths are removed, we return material to ground in a dry state. That's a critical environmental benefit. Only about three to six percent of mines around the world implement this process. No rare earth sites do. Also, about 95% of the water we use—a billion and a half liters per year— is recycled.

Mountain Pass is a co-located site with a world-class ore body adjacent to a scaled processing facility. Rare earths, from a geological perspective, are not all that rare. The ability to extract and process them economically, however, is exceedingly rare. Mountain Pass is considered world-class because the concentration of contained rare earths is about seven percent. That compares to .1% to 4% for most global deposits, including those in China. Most competing rare earth operations separate mining from processing – often by hundreds or thousands of miles. This adds logistical complexities, increases energy and carbon intensity, and ultimately, impacts a project’s bottom line.

Higher gasoline prices tend to reduce consumption as people adjust their driving patterns, economists say. In the short term, a 10% rise in gasoline prices results in a 2% to 3% decline in gasoline consumption, said Lucas Davis, an economist at the University of California, Berkeley.

Adding to the complexity, higher commodity prices and supply-chain issues have raised the cost of wind and solar farms, which face lengthy regulatory approval processes, lawyers and investors said. In a recent research note, Deutsche Bank AG senior economist Eric Heymann cited skilled-labor and material shortages as well as community opposition to wind farms as some of the obstacles.

The U.S. now plans to boost liquefied natural gas shipments to Europe, aiming to ship 50 billion or more cubic meters a year through at least 2030, to help meet the continent’s demand.

The impact on the Saudi economy would likely depend on the quantity of oil sales involved and the price of oil. Some economists said moving away from dollar-denominated oil sales would diversify the kingdom’s revenue base and could eventually lead it to repeg the riyal to a basket of currencies, similar to Kuwait’s dinar.

It is possible the Saudis could back off. Switching millions of barrels of oil trades from dollars to yuan every day could rattle the Saudi economy, which has a currency, the riyal, pegged to the dollar. Prince Mohammed’s aides have been warning him of unpredictable economic damage if he moves ahead with the plan hastily.

It also comes as the U.S. economic relationship with the Saudis is diminishing. The U.S. is now among the top oil producers in the world. It once imported 2 million barrels of Saudi crude a day in the early 1990s but those numbers have fallen to less than 500,000 barrels a day in December 2021, according to the U.S. Energy Information Administration.By contrast, China’s oil imports have swelled over the last three decades, in line with its expanding economy. Saudi Arabia was China’s top crude supplier in 2021, selling at 1.76 million barrels a day, followed by Russia at 1.6 million barrels a day, according to data from China’s General Administration of Customs.

Meanwhile the Saudi relationship with the U.S. has deteriorated under President Biden, who said in the 2020 campaign that the kingdom should be a “pariah” for the killing of Saudi journalist Jamal Khashoggi in 2018. Prince Mohammed, who U.S. intelligence authorities say ordered Mr. Khashoggi’s killing, refused to sit in on a call between Mr. Biden and the Saudi ruler, King Salman, last month.

It would be a profound shift for Saudi Arabia to price even some of its roughly 6.2 million barrels of day of crude exports in anything other than dollars. The majority of global oil sales—around 80%—are done in dollars, and the Saudis have traded oil exclusively in dollars since 1974, in a deal with the Nixon administration that included security guarantees for the kingdom.

Germany hasn’t sent tanks to Ukraine and agreed to ship seven pieces of heavy artillery. So far, Europe’s largest economy, with a population exceeding 83 million, has sent military aid worth about €200 million, according to government estimates—less than Estonia, with a population of just over one million. France has sent 12 howitzer-type cannons to Kyiv and no tanks or aerial defenses.

“I knew it was coming,” Knighton told NBC Sports, “but I didn’t know it was coming this early into the season. I also didn’t know that it was going to come this early in my career, either. I thought I was going to run 19.4 when I’m like, 20 or something, like when I get stronger and older.”

Ato Boldon, the Trinidadian former 200-meter world champion and NBC Sports analyst, calls Knighton’s feat the junior equivalent of Bob Beamon breaking the long jump world record by nearly two feet.“If one junior in history, who is considered the greatest sprinter of all time, has broken 20 (seconds), and now this kid is half a second—which is a lifetime in the sprints—faster, then yes. It’s not an exaggeration to say that this is the most Beamon-esque junior performance

The IMF has pointed to high debt levels in emerging markets as a sign that many economies would be vulnerable as central banks in advanced economies begin raising rates to tame inflation. Average government debts in emerging markets had reached 64% of GDP at the end of 2021, up almost 10 percentage points since 2019, the IMF said in February.

The most important planned project is a roughly 1,600-mile pipeline connecting Russia’s Yamal peninsula to China, called Power of Siberia 2. The first Power of Siberia project cost more than $50 billion and took more than five years to build. It will send nearly 40 bcm a year to China at full capacity and the second could send as much as 50 bcm.When the two countries agreed to terms on the first pipeline in 2014, China extracted relatively cheap gas prices. “Our Chinese friends drive a hard bargain as negotiators,” Russian President Vladimir Putin remarked at the time.

“The kingdom finds it laughable that last year, several countries, including the United States, have been pressuring them to stick to [plans to zero out carbon emissions by 2050] but now are asking them for more oil,” said a Saudi official.

European leaders will find it more difficult to wean themselves off Russian natural gas, which typically accounts for more than 30% of the EU’s supply and mostly comes via pipeline. JPMorgan Chase estimates that by the end of the year Europe will still receive between 81% and 94% of the amount of Russian gas it took in 2021. The EU has said it would stop using Russian oil and gas by 2027, but ending its reliance on Russian energy could come at a heavy cost.

A German embargo of Russian crude would likely mean that instead of Russian oil reaching Hamburg in a week or two, it would take several months to travel to China, he noted. Conversely for Middle Eastern oil, the embargo would trigger a longer voyage to Europe for crude that would have ordinarily gone to Asia. Such inefficiencies will drive up the costs of shipping, insurance, and financing that underpin the energy trade, he said.

As the world transitions to a clean energy economy, global demand for these critical minerals is set to skyrocket by 400-600 percent over the next several decades, and, for minerals such as lithium and graphite used in electric vehicle (EV) batteries, demand will increase by even more—as much as 4,000 percent. The U.S. is increasingly dependent on foreign sources for many of the processed versions of these minerals. Globally, China controls most of the market for processing and refining for cobalt, lithium, rare earths and other critical minerals.

Unless credit creation in 2022 rivals the historic growth seen last year, bank deposits look set for the first annual decline since the early 90s.

Wholesale electricity prices have soared by more than 140 per cent in 2022 alone, driven by surging gas prices even as 70 per cent of Australia’s gas is exported overseas.

Critics say the Kremlin has succeeded on other fronts over the past 100 days, such as stifling dissent and opposition to the war and pushing a pro-invasion narrative. Both state and independent polls show Mr. Putin has the support of most Russians.A poll conducted by the Moscow-based independent Levada Center during the last week of May found that “support for Russian armed forces in Ukraine remains high,” with 73% saying they believed that the so-called “special military operation” is progressing successfully, up from 68% in April.“The West doesn’t understand the mentality of the Russian people,” Mr. Ivanov said. “It doesn’t understand that for a Russian person, using the language of sanctions, ultimatums, etc., is completely useless. This is the most serious mistake of the West.”

But note that a US recession isn’t required to bring down the price of oil. All that’s needed is industrial stagnation or decline in many other countries.

Nine out of 10 previous postwar recessions began shortly after a big spike in the price of oil. Yet those recessions always slashed oil prices dramatically. People who have been predicting both a nasty US recession and $200 oil prices are contradicting themselves.

Oil prices have a huge impact on producers’ cost of production — profits and losses — not just on consumers’ cost of living.

The price of crude oil has jumped as high as $135 lately, up from $87 in early February. The news encouraged some Wall Street analysts to suggest oil might approach $200 before long. In fact, that’s quite impossible: The world economy can’t handle current energy prices, much less a big increase. Which in turn means that oil prices will fall.

In short, a huge share of crude oil is used to produce and distribute industrial products. That explains why the price of oil is extremely cyclical — that is, it tends to rise during economic booms and fall during contractions. It dropped 44 percent in the last recession (from November 2000 to November 2001), 48 percent from October 1990 to January 1992 — and 71 percent from July 1980 to July 1986.

Last month, sales of used cars less than 10 years old were down 27% compared with March 2021, according to car shopping app CoPilot, which tracks dealership prices nationwide. The average price during that same time jumped 40% to $33,653. For nearly new cars — those 1 year to 3 years old — sales in March were down by 31% compared to a year earlier, while the average price of $41,000 is 37% higher, CoPilot research shows. In the first two months of 2022, prices for this age group dropped almost by 3% before increasing again in March amid continued production challenges for new cars and uncertainty related to the war in Ukraine.

The upshot is that consumers are taking their time buying a used car. The average time spent looking for one has jumped 93% to 171 days from 89 days in from March 2021, resulting in dealer inventories of 1-year to 3-year-old cars returning to pre-pandemic levels.

There are two new risks that history doesn’t help with. The first is the unprecedented amount of liquidity that has been pumped into finance by central banks buying bonds. A lack of liquidity is what usually creates financial problems, as it prevents debts being rolled over. As the Fed and other central banks drain liquidity, problems might reveal themselves. The second is that there’s a massive, and unknown, amount of private debt issued by lightly regulated shadow banks. My worry isn’t mainly that the lending turns sour (although it might). Rather, the danger is that the private-debt boom turns out to be a function of easy money. If investors prove less willing to lock up their money in private-debt funds as interest rates make mainstream investments more attractive, there will be a steady withdrawal of lending capacity. That could hold back the economy and make it harder for companies to refinance loans. These sorts of knock-on effects could take years to feed through into financial trouble.

In 1994 and 1997-1998, it took more than a year for emerging-market crises—in 1994 Mexico’s “Tequila crisis,” in 1997 the Asian devaluations followed by Russia’s domestic-debt default—to feed back to Wall Street. When they did, Wall Street’s financial stability wobbled. More worryingly, the loss for investors in benchmark 10-year Treasurys from their peak is already much bigger than the shock of 1994.

Long before Mr. Buffett discussed naked swimmers, economist John Kenneth Galbraith invented the “bezzle”—fraudulent losses accumulated in the good times that are only discovered when the economy weakens. After a decadelong bull market with only the briefest of interruptions in 2020, there could be plenty of bezzles yet to emerge. The biggest bezzles in recent history took painfully long to emerge. After the bursting of the dot-com bubble in March 2000, it was 18 months before accounting fraud took down power company and leveraged energy trader Enron in what was then the biggest-ever bankruptcy. After the 2008 financial crisis, scandals continued for years across both finance and real-economy businesses.

Companies in the West, too, have been exploring and adding several services within their apps gradually but not explicitly coming out as a super app. Case in point, Amazon in India, also lets you pay utility bills, book travel, order food, groceries and so on.

Success of super apps in the emerging markets is not a co-incidence. According to a report by Sturgeon Capital, “Super apps are strongly aligned with emerging market governments, not least because of their role in shrinking the grey economy. The Indonesian President fired a cabinet member who appeared to be anti-Gojek and then appointed Gojek’s founder to his next cabinet. This is in stark contrast to the US and EU leaders, who are extremely hostile to the super app ambitions of Amazon, Facebook, and Google.”

Google Maps does not have a connected payment service like WeChat does, and, perhaps, that’s the reason why it’s not boasting a super app status yet.

Verbs that can act on many objects. This is possibly the single most powerful thing you can do to make an interesting game. If you give a player a gun that can only shoot bad guys, you have a very simple game. But if that same gun can be used to shoot a lock off a door, break a window, hunt for food, pop a car tire, or write a message on the wall, now you start to enter a world of many possibilities.

In the real world, we don't want anyone rearranging the mess on our desks, but we don't mind if someone puts a Post-It note on our computer screen, empties the wastebasket overnight, or refills the newspaper stand with the latest edition.

Similarly, computer interfaces must evolve to let us utilize more of the power of language. Adding language to the interface allows us to use a rich vocabulary and gives us basic linguistic structures such as conditionals. Language lets us refer to objects that are not immediately visible.

The striking thing is how the two companies peaked are almost precisely the same time and how that moment (end of 2010) was not related to the entry timing of their nominal disruptor. Recall that both companies cite the iPhone as the factor which caused a shift in the basis of competition. But the iPhone launched in mid 2007 (at the beginning of the graph’s date range.) BlackBerry had 16 quarters of growth after the iPhone and Nokia nearly the same. The stock prices of the companies also prospered for a period long after the iPhone entered the scene validating a do-nothing approach.

In my time using Arc, I’ve been struck by the product’s smooth, playful, and at times disorienting experience. I’ve enjoyed its clever tab organization and found its eclectic features refreshing. Screenshots, instead of remaining static images, come attached with a link to their source website, for example, while a whiteboarding tool called Easel allows you to create and share a sketchpad within the browser.

Still, he says, Arc’s waitlist has received tens of thousands of sign-ups. In anticipation of Arc’s public release this fall, Browser Co. is now signing up thousands of beta users per week.

The team running Chrome had to contend with one important factor: Even a slight design tweak to a product with 2 billion users could have significant financial consequences, according to Fisher. More “pan-galactic” changes, he adds, became almost impossible. During his last decade at the company, his team was very aware of the tendency toward tab chaos and even had ideas about how to tweak their browser to improve it. “The Chrome team has built all these things but has been unable to ship them” because features that sorted out the mess tended to result in fewer google.com search queries—and fewer Google ads, says Fisher, now an Arc adviser.

When they shared a rough Arc prototype with industry colleagues a year later, Darin Fisher, who was Chrome’s vice president for engineering until leaving Google in early 2021, remembers being blown away: “I was like, ‘Oh my God! This is the stuff I’ve wanted to be able to do for so long!’ ”

A grid of buttons pointing toward favorite destinations remains glued to the top of the panel. Each of these services operates more like a desktop app than a web page. Clicking the Gmail icon will take the user back to a single, original Gmail inbox, rather than reloading gmail.com in tab after tab. Hovering the mouse over a Google Calendar button will surface a tiny panel of upcoming appointments. Spotify comes with an embedded player to shuffle through songs. Any tabs opened throughout the day appear at the bottom of the panel and—this can take some getting used to—are automatically set to close and archive in 12 hours.

We ought to understand freedom as having two dimensions: freedom from and freedom for. Too often we fail to consider that freedom is fully realized only when it is conceived not only as a freedom from restraint, but also as a freedom to fulfill a deeper calling toward which freedom itself is but a penultimate means. The two are related but not identical. What Ellul would have us see is that the modern technological order tends to promise the former while simultaneously eroding the latter.

To one interviewer he said, “I would say two things to explain the tenor of my writings. I would say, along with Marx, that as long as men believe that things will resolve themselves, they will do nothing on their own. But when the situation appears to be absolutely deadlocked and tragic, then men will try and do something.” (As odd as it may seem to some contemporary American readers, it could be said that Marx and Jesus where the two pillars of Ellul’s thought.)

The complete technological milieu has a total effect that is greater than its constituent parts, just as the total effect of a work of fiction cannot be properly assessed merely by tabulating literary devices and figures of speech. And these effects include shifting assumptions, new habits and dispositions, the dissolving and reconstitution of the plausibility structures sustaining political values, the redrawing of the horizons of expectation and desire, restructurings of the social order, the reshaping of our imagination, and a reorientation of our experience of the world. None of which will be apparent from a social history of the refrigerator, however interesting such a tale might be.

Returning once more to Ellul, later in a 1983 article about ethics and technology, he also recognized the problem which still plagues us but that few seem to acknowledge: those who call for ethical technology presume that human beings “must create a good use for technique or impose ends on it, but [are] always neglecting to specify which human beings.”“Is the ‘who’ not important?” Ellul asked.

“It seems impossible to speak of a technical humanism,” Ellul concluded after some further discussion of the matter. It was more likely, in his view, that human beings would simply be forced to adapt to the shape of the technological system. “The whole stock of ideologies, feelings, principles, beliefs, etc. that people continue to carry around and which are derived from traditional situations,” these Ellul believed would only be conceived as unfortunate idiosyncrasies to be eliminated so that the techno-economic system may operate ever more efficiently. “It is necessary (and this is the ethical choice!) to liquidate all such holdovers,” he continued sarcastically, “and to lead humanity to a perfect operational adaptation that will bring about the greatest possible benefit from the technique. Adaptation becomes a moral criterion.”

This humanizing of technology presumes the existing techno-social status quo and ultimately serves its interests. It only amounts to a recalibration of the person so that they may fit all the more seamlessly into the operations of the existing techno-economic order of things. That techno-economic order is itself rarely questioned; it is taken mostly for granted, the myth of inevitability covering a multitude of sins.

This humanizing of technology presumes the existing techno-social status quo and ultimately serves its interests. It only amounts to a recalibration of the person so that they may fit all the more seamlessly into the operations of the existing techno-economic order of things. That techno-economic order is itself rarely questioned; it is taken mostly for granted, the myth of inevitability covering a multitude of sins.

In Ellul’s terms, the answer to problems generated by technique is the application of ever more sophisticated and invasive techniques. The more general technological milieu is never challenged, and there’s very little by way of a robust account of what human flourishing might look like independent of the present technological milieu. 

I fully recognize that I may very well be guilty of a common disorder: thinking that what the world really needs more of is the very thing about which I happen to care and with which I have a measure of aptitude. I also realize that my scribblings here will not amount to even a blip on the cultural radar. Be that as it may.

I am especially interested in the work of older critics, critics whose work appeared in the early and mid-twentieth century. I find these critics especially useful precisely because of their distance from the present. As I’ve noted elsewhere, if we read only contemporary sources on tech, we would be unlikely to overcome our chief obstacle: our thinking is already shaped by the very phenomena we seek to understand. The older critics offer a fresh vantage point and effectively new perspectives. They begin with different assumptions and operate with forgotten norms. Moreover, their mistakes will not be ours.

As far as the human-technology relationship is concerned, the three ways of being-with technology that Mitcham outlines are ancient skepticism, Renaissance/Enlightenment optimism, and Romantic uneasiness.

The first thing that came to mind when I read this paragraph was the digital dualism debate. One could, for instance, substitute the human-technology pair above with the online-offline pair and retain the sense of the paragraph. Once mutuality is established, the next, more interesting move is to explore the different forms this mutual relationship takes.

The first order consequence of cars was that you could move places faster. But the second order consequence of cars is that new business models became possible: now you could create a store that sold to everybody within 50 miles of you, not one mile. That store probably looks very different than the ones that came before it. It looks like Walmart.

So what does this mean for making predictions today? Start by looking for constraints. There are still a lot of them: food, water, energy; homes, jobs, transportation; safety, education, happiness; constraints are everywhere. What happens if they go away, or change significantly? What current business models, built around those constraints, will suddenly be very out of date? How would brand new business models, free from those constraints, be different? How will the future be different from the present?

Left unaddressed, competitive exposure due to this flaw in their network effect could get Uber into a situation like we see with the airline industry, where there’s razor-thin margins and high sensitivity to price competition. That’s a stark contrast to the high margin, winner-take-most market you normally see with network effects companies. Uber’s ~$80+ billion valuation, not to mention its stated ambition to corner the $12 trillion global transportation market, is based on the assumption that it will end up looking more like a company with true network effects, not like an airline. So it stands to reason that they’ve been doing whatever they can to avoid the commoditized fate of the airlines. Enter reinforcement.

Barriers to entry for ridesharing businesses are relatively low as a result — it’s not hard to get down to 4 minute wait times. New ride-hailing apps can easily gain critical mass on the supply side in a given geo and try to compete, like Juno in New York did. Unlike true marketplaces such as OpenTable or eBay, Uber can’t establish an escalating supply-side advantage with their network effect, and their core business is vulnerable to new entrants. Compounding this are the extremely low switching costs of ridesharing for both the demand and supply side, leading to rampant multi-tenanting. It costs nothing but a couple of seconds for riders to switch from their Uber to their Lyft app on their smartphone, meaning that many riders have both apps downloaded and decide based on price. Drivers can also simultaneously drive for both Uber and Lyft (and some third app) with little to no cost to them.

If you want people to link to your website, you need something on your site worth linking to. (Also known as “Linkable Assets”). A Linkable Asset can be a blog post, a video, a piece of software, a quiz, a survey… basically anything that people will want to link to. In most cases, your linkable asset will be an amazing piece of content (which is why search engine optimization and content marketing are so closely tied together).

The funny thing about these situations is that they can be quite hard to see, except in hindsight after they’ve been resolved. For the most part, every individual actor is behaving quite rationally; it’s the overall effect that is both comical and tragic all at once.

The way to get startup ideas is to look for theatres of the absurd: situations we encounter in life that are completely and totally backwards because of some concession to reality that makes no sense.  

Sure, it makes the case that Company X is better than average. But that doesn’t carry much meaning when ‘average’ just means failure, and better than average could very well mean ‘delayed failure’, or ‘failure but only after a bunch of investor money was sunk into it’.

For startups, the default expectation is zero: you’re trying to escape the default with a radical, innovative business model where you know a secret that no one else has picked up on yet. If you’re running a startup (especially a venture-backed one), success isn’t a function of linearly adding lots of little pieces: if stars align in just the right way, you get hyper growth; otherwise, it didn’t work. You’re looking for (radical idea) x (innovation) x (execution) x (super fast growth) to line up exactly the right way and get a huge, explosive result. And here’s the thing: Gaussian distributions don’t describe those kinds of outcomes well at all. Sure, there are a lot of little pieces involved, but the ‘average’ result carries a very different meaning: the average startup is a failure. Non-failures are relatively rare events. We need a different kind of curve to explain what’s happening: something a little bit closer to the F Distribution.

Russian officials have said that oil production this year could decline by as much as 17% because of Western sanctions. This presents a longer-term issue for Russia since much of its oil infrastructure isn’t geared to quick and deep production cuts. The frigid Siberian climate means pipelines can burst without oil in them and low-yielding Soviet-era fields are expensive to maintain and restart. Analysts say that much of the production that Russia closes now would be permanently lost.  Another downside for the Kremlin is that the EU embargo is likely to push the prices of Russian crude further down, reducing Moscow’s revenues from those barrels it is able to sell. Longer distances to ship crude to Asia mean that Russia’s margins will be reduced even further, said Simone Tagliapietra, a senior fellow at Bruegel.

The pipeline exemption won’t provide much respite for Moscow. Before the war, the EU imported about 2.5 million barrels of Russian crude each day of which 800,000 barrels was via the Druzhba pipeline, the world’s longest pipeline network at 5,500-kilometers-long. By year end, Russian crude oil flows into the EU will be 500,000 barrels a day, 20% of prewar levels, said Amrita Sen, founder of Energy Aspects, a consulting firm. That equals roughly $170 million a day in lost revenue for Russia, at the current discounted prices for Russian crude.

Most of us don’t realize just how much the “app-centric” mindset is ingrained into us, until we get a chance to think in a “problem-centric” way free from the limitations of apps.

Every productivity app company these days seems to embrace the phrase “second brain,” as in “make X app your second brain.” One of my big takeaways from using Monocle on a daily basis for the last week has been that no single app can be my second brain. There are going to be parts of my life that are inherently spread out across different apps.

And Microsoft was running the operating system, but this is a world that I could explore to my heart’s content. This is a world that I could go in and not just the computer and Windows, but I think even more importantly, the internet with somewhere that you could go explore. And so something what’s really just fascinating about this world that you can go into is that worlds are meaningful if they contain challenges for you. Easy worlds are boring and people leave, worlds need to have challenges in them and jungle gyms for people to climb on and go explore.

So here’s an exercise to help expose those A+ problems, that single most important thing: Ask yourself, ‘What would be the WORST way for me to proceed? What would the worst possible outcome look like? And then ask: what is the opposite of that?

What is the one single thing you could do whereby: a) if you get this thing right, everything else is just an implementation detail, and b) if you don’t get this thing right, then nothing else will work no matter how good a job you do?

The ecosystem collectively benefits by being lean, but any given participant shouldn’t strive to be. 

The Lean Startup is another one. The Lean Startup described a worldview about innovation that preached, “We don’t know what works, we have to try everything, so run lots of little experiments and iterate on your position rapidly in order to figure out how we ought to build the future.” That feels right, and it is right, except it’s right on the level of the startup community as a whole; not on the level of any given company. 

The thing is, just to repeat this again, Disruption Theory is doing a great job of explaining the forces and incentives that exist at the level of the ecosystem. So it rings true, as it should. The issue is that it’s explaining a kind of gameplay that’s carried out at one level of abstraction higher than what the product and growth people at disruptive tech companies actually care about, or what early-stage investors can measure and finance. So the advice that it spits out feels as though it should be true, but ends up being paradoxically backwards. Now we can understand why.

Christensen devotees might at this point protest, and argue that these companies represent “New Market Disruption”. In retrospect that’s what they were, but in practice that’s not what they looked like. They looked like sustaining innovations! The iPhone was famously lambasted by Christensen as a sustaining innovation on the cell phone. Uber was criticized as a sustaining innovation on livery cars. Almost everything starts out as a derivative of something else that already exists, addressing a market that already exists in some form. If Disruption Theory can only recognize New Market Disruption in retrospect, then it’s not that useful.

That’s key to the mystery: the ecosystem as a whole may be disruptive, but any given piece of this ecosystem does not really want to compete on price or plug-and-play modularity at the low end. They want to deliver the best experience possible, not compete on cost! They want the best users, not the lousy ones! 

The smartphone’s job is “An interface on the whole world, in your pocket” and Instagram’s job is “Find out what your friends are up to, share and signal status”; neither of those compete directly in a JTBD sense with the integrated electronics that came before them. If they had, Apple would look like Sony, Instagram would look like Flickr, and neither would be worth hundreds of billions of dollars. 

The incumbents look like classic disruptees. The problem is that fewer and fewer of the newcomers look like classic disruptors. Upstarts are competing on performance and going after high-end customers, which isn’t at all what disruptors are supposed to be doing.  Instead, we’re seeing ecosystems of many different products and businesses, many of which in isolation look like integrated businesses or a sustaining innovations and compete on high-end, quality user experience. But as they do so, they create an ecosystem of technology that undermines and eventually disrupts the integrated, single-purpose legacy systems that preceded them. 

The second important part of the theory is its explanation for how incumbents respond to this kind of threat. Christensen explains how the rational business decision for incumbents is to retreat upmarket rather than compete head-on against these disruptors, because entering into a low-end competition undermines their own business model. This could be for a variety of reasons. Management could feel that their integrated product, and the high quality, brand, and high margins it bestows, is too important to compromise. It could also be that the business’s cost structure or debt structure does not allow them to compete on price. Either way, the hallmark of disruption is seeing incumbents have “allergic reactions” to this new form of competition. 

Today’s disruption isn’t a story of individual businesses disrupting incumbents, but rather of business ecosystems disrupting incumbents. The result is a framework that feels more relevant than ever, but that generates reliably incorrect advice. 

He breaks down secrets into two categories: secrets about the natural world (more or less things you can patent, be they chemicals, compounds, or algorithms), and secrets about people (aspects of our behaviour and desires that remain unacknowledged or misunderstood). Both can be important vehicles to building durable, profitable companies, although in Thiel’s view secrets about people tend to be more interesting and relatively undervalued.

One central theme of the book is the value of secrets: not secrets that you hide and tell no one, but rather things that you know to be true even though others think you’re crazy. Thiel’s main point is that if you want to build a company that can capture a substantial portion of the value it creates, you’ll need to know something important on which few other people agree with you initially: “What valuable company is nobody building? Every correct answer is necessarily a secret: something important and unknown, something hard to do but doable. If there are many secrets left in the world, there are probably many world-changing companies yet to be started.” –Peter Thiel, Zero to One

The founders who do turn toys into companies are generally the ones who relentlessly push what they've made to users and obsessively improve the toy in response to feedback.

The third thing that goes wrong when you take your toy too seriously is that you immediately start optimizing on the things that you believe serious businesses should - profit and margins. While these things are important in the long run, focusing on them too early injects an impossible set of things for an early startup to do.

The second thing that goes wrong when you take your toy too seriously is that you signal to the bigger and better funded companies already in the marketplace that you are onto something important and profitable. This is bad, because those companies will start paying attention to your toy too early and copy/buy/kill it. Airbnb looked like a doofy hipster thing to hotels for a very long time. And then, when it was too late, they realized that it wasn’t a toy at all. By that time, Airbnb had enough customers, revenue, and funding to survive the attacks of the incumbents.

The first thing that goes wrong is you become unwilling to experiment with ideas that aren’t clearly aligned with making a big company. This means that people building serious things focus rapidly on revenue. They become risk averse and innovation averse. Companies built on new technologies have to capitalize on non-obvious ideas, ones that wouldn’t pass muster in large corporations. Otherwise, the large existing companies would do these things themselves.

This kind of an annotation layer could also create more intimate contexts for conversation. If I’m doing a deep-dive research into the Faroe Islands, an annotation layer might let me know that someone else had recently visited the page in a similar frenzy of research. We might meet each other in this meta-layer in the same way we might bump into each other at a library while poring over the same row of books.

Overall, comparing our results to the predictions implicit in rational action theory and costly signaling theory, the majority of evidence suggests that rising costs for extreme scores yields greater crowd wisdom even when there is no conflict or competition among users. However, there appeared to be an asymmetry: boosting time costs for reporting very low scores had some negative effects, which is consistent with rational action theory. Indeed, if raters have initially little or no motivation to report low scores, increasing the cost of reporting such scores may reduce their rating effort even further. We therefore suggest that tuning signaling time costs should be viewed as an optimization problem of fitting appropriate costs to selection regimes and to the expected motivation of the users (30).

So far in 2022, the five largest deals by startups, which account for a fifth of the total venture funding in India, have been led by sovereign wealth funds and pension funds such as Ontario Teachers Pension Plan, Canada Pension Plan Investment Board and Qatar Investment Authority with private equity and venture capital firms taking a backseat.In 2021, the top five deals were led by late-stage private equity and venture capital firms like Footpath Ventures, GSV Ventures, Redbird Capital Partners, Alpha Wave Global and Prosus Ventures.

According to data shared by market intelligence firm CB Insights, venture funding to India-based startups dropped to $3.6 billion in the second quarter of 2022 so far from $8 billion in the January-March quarter and over $10 billion a year back. The data also showed that venture funding slowed for the first time sequentially in the January-March quarter of this year since the October-December quarter of 2020.

Unfortunately, I think it’s unlikely that we will see a product like I described anytime soon. The world’s largest bookstore, most popular eBook reader, and biggest social network for books are all owned by a company that has very little competency in design and user-facing product innovation.

You could even build leaderboards for different topics based on the content of the books and articles you read. Or think about a score that indicated how balanced your reading behavior per topic was (to incentivize users to read takes on political topics from different perspectives).

A related product I’d love to see is Strava for Reading. Imagine an eBook reader that not only tracks how much time you spend reading but also *what* you are reading. Based on these proof-of-(reading)-work mechanisms you could build streaks or GitHub-contributions-like visualizations that incentivize users to read more (and more regularly).

I’m more optimistic about Strava for Learning. While the activity of learning itself might be hard to quantify, you can measure the outcome of learning: knowledge. Has anyone built a multiplayer version of Anki yet? Flash cards would be a perfect proof-of-knowledge mechanism and could easily be turned into a game where you compete against friends. Similar to physical activity in the Strava example, learning is not something that most people enjoy doing. As TikTok founder Alex Zhu points out, education goes a little against human nature. In combination with a strong enough signaling mechanism however, you can get users to participate. It’s kind of the opposite of Chris Dixon’s famous “Come for the tool, stay for the network” strategy. Come for the status, stay for the tool.

What other social networks should we build that could have similar positive feedback loops? And what are their proof mechanisms?

What’s great about Strava is that it reinforces a behavior that’s actually good for you: While the status game that initially got you into the app might be zero sum, the actual physical exercise you have to put in to compete has a very positive, compounding effect.

The cost to participate in TikTok’s status game is a lot higher than Instagram’s (compare a well-made dance choreography on TikTok to your median Instagram travel post) – but its powerful feed algorithms also make discovery easier and thus reward users faster and with more social capital.

When new social networks emerge they have to introduce new proof mechanisms to differentiate themselves from existing incumbents. These can either be novel proof-of-creative-work hurdles or completely new proof-of-x mechanisms.

Social networks are therefore not only signaling distribution (and amplification) networks – they also allow users to prove their signaling messages. The creative proof-of-work is just pretext and helps to boost your post. What’s more important are the additional proof mechanisms that social networks provide. In the case of Instagram those are photos and location tags. Instagram is essentially “pics or it didn’t happen”-as-a-service.

That problem is that the nature of cross-side network effects will ultimately lead to newsletters facing the same dilemma: As long as the number of subscribers increases, so will the number of newsletter publishers. Users’ email inboxes – already full with non-newsletter-emails – will get as crowded as social media newsfeeds. Just wait until Gmail introduces an algorithmic feed for your newsletter inbox.

While blogs could in theory be read by anyone with a browser, the technology that really mattered on the consumer side were RSS readers – and those were never adopted en masse. Social networks on the other hand have become a victim of their own success: The amount of consumers has attracted so many players on the supply side that platforms needed to introduce algorithmic feeds to handle the abundance of content. This is why writers like newsletters so much. As other distribution channels are becoming increasingly crowded, email provides an alternative trade route.

So what then explains the newsletter hype?Simple: Distribution.

What’s special about personal blogs is not just the actual writing, it’s also the design the content is presented in. Newsletters lack the unique design aspect that blogs have. Side Note: I firmly believe that the lack of design customization options is one of the main reasons Medium has never lived up to its potential.

What’s interesting about newsletters is that consumers are willing to pay for them. While blogs have never really figured out monetization (apart from ads), Substack alone claims more than 50,000 paying subscribers. This might partly be a timing thing (blogs were popular during a time when people weren’t used to the concept of paying for digital content yet), but I wonder if it’s also driven by the nature of how newsletters work: You have to wait to receive them – like an Amazon package. Maybe that makes the medium feel more tangible and thus worth paying for?

Most people have both a “Collector” and a “Librarian” inside them when they keep track of their ideas. The Collector wants to capture every idea you get, from shower thoughts to ideas that hit you on a long drive home. If you capture all your disparate ideas, maybe they’ll add up to something. The Librarian inside you wants to grow an organized, structured, clean library of ideas you can understand and browse. If you know how to find any idea you keep, you’ll be able to make the most of it when you need it. Often, these two needs are in conflict. It’s difficult to organize every idea you capture, because most ideas don’t start out with a solid form. The result is that you might let most of your ideas slip away in the moment, or you might end up with pages and pages of notes of ideas that you’ve captured and are afraid to throw away, but you can’t make sense of, much less learn from.

Bookmarks are great to remember *what* you want to revisit later – but not *why* you saved something in the first place. I would love to be able to add notes to my bookmarks directly in each app so that I have some context on why these objects are important when I return to them later.

Most of us don’t use just one bookmarking app for everything. We use different bookmarking apps or bookmarking features depending on the type of object we want to save for later: Podcasts are usually saved in a dedicated podcast app, for example. Articles are bookmarked in Pocket, books on Goodreads, songs on Spotify, places on Foursquare, products on Amazon … you get my point.

Why isn’t there a digital note taking tool that works like this?

Post-it note reminders are similar to Hey’s Thread Notes in that they are triggered not based on time but on events that don’t have a (forecastable) deadline. They are essentially like notifications that appear when you look at specific objects.

You could write down notes like this in a separate notebook, but then you’d lose the connection to the source they are based on. What makes post-it notes so interesting is the spatial relationship between the notes and their respective context.

One of the reasons I still read a lot of non-fiction in physical book form is because it’s easier to bookmark and annotate passages that I quickly want to find again later. Similar to Thread Notes, sticky note bookmarks help me highlight the most important items in a long list.

Post-it notes serve two of the same functions that Hey’s note features offer: highlights and reminders.

Tinder’s entire business model is built on the assumption that people are willing to spend money on signaling. That assumption seems to be correct: Tinder made a staggering $1.2 billion in revenue last year making it one of the most successful apps world wide.

Instead of monetizing network membership, the software products that monetize most successfully have chosen another strategy: Make memberships free and monetize signal amplification instead.

Signaling can be broken down into signal message, distribution and amplification. “Real world” products are great at visualising a signal message due to their physical nature. However, as a consequence there are also physical boundaries to distribution because there are only so many people you can signal to at once.

From a user perspective, people are starting to talk more and more about the soul-withering effects of playing an always-on status game through the social apps on their always connected phones. You could easily replace Status as a Service with FOMO as a Service. It’s one reason you can still meet so many outrageously wealthy people in Manhattan or Silicon Valley who are still miserable.

Structured properly, social capital incentive structures can serve as an invaluable incentive. For example, curation of good content across the internet remains an never-ending problem in this age of infinite content, so offering rewards for surfacing interesting things remains one of the oldest and most reliable marketplaces of the internet.

As long as we have multiple social networks that don't quite work the same way, there will continue to be these social media arbitragers copying work from one network and to a different network to accumulate social capital on closing the distribution gap. Before the internet, men resorted to quoting movies or Mitch Hedberg jokes in conversation, to steal a bit of personality and wit from a more gifted comedian. This is the modern form of that, supercharged with internet-scale reach.

It's strange to think that social networks like Twitter and Facebook once allowed users to just wholesale export their graphs to other networks since it allowed competing networks to jumpstart their social capital assets in a massive way, but that only goes to show how even some of the largest social networks at the time underestimated the massive value of their social capital assets. Facebook also, at one point, seemed to overestimate the value of inbound social capital that they'd capture by allowing third party services and apps to build on top of their graph.The restrictions on porting graphs is a positive from the perspective of the incumbent social networks, but from a user point-of-view, it's frustrating. Given the difficulty of grappling with social networks given the consumer welfare standard for antitrust, an option for curbing the power of massive network effects businesses is to require that users be allowed to take their graph with them to other networks (as many have suggested). This would blunt the power of social networks along the social capital axis and force them to compete more on utility and entertainment axes.

For the individual user, we've standardized on a few basic social capital accumulation mechanisms. There is the profile, to which your metrics attach, most notably your follower count and list. Followers or friends are the atomic unit of many social networks, and the advantage of followers as a measure is it generally tends to only grow over time. It also makes for an easy global ranking metric.

As with cryptocurrency, it's no use accumulating social capital if you can't take ownership of it and store it safely. Almost all successful social networks are adept at providing both accumulation and storage mechanisms.It may sound obvious now, but consider the many apps and services that failed to provide something like this and saw all their value leak to other social networks. Hipstamatic came before Instagram and was the first photo filter app of note that I used on mobile. But, unlike Instagram, it charged for its filters and had no profile pages, social network, or feed. I used Hipstamatic filters to modify my iPhone photos and then posted them to other social networks like Facebook. Hipstamatic provided utility but captured none of the social capital that came from the use of its filters.

Meanwhile, on Twitter, if one of your tweets somehow goes massively viral, you still have to attach a follow-up tweet with a link to your GoFundMe page, a vulgar monetization hack in comparison. It’s China, not the U.S., that is the bleeding edge of influencer industrialization.

The danger of having a proof of work burden that doesn't change is that eventually, everyone who wants to mine for that social currency will have done so, and most of it will be depleted. At that point, the amount of status-driven potential energy left in the social network flattens. If, at that inflection, the service hasn't made headway in adding a lot of utility, the network can go stale.

Streaks, of course, have the wonderful quality of being unbounded. You can maintain as many streaks as you like. If you don't think social capital has value, you've never seen, as I have, a young person sobbing over having to go on vacation without their phone, or to somewhere without cell or wifi access, only to see all their streaks broken. Some kids have resorted, when forced to go abroad on a vacation, to leaving their phone with a friend who helps to keep all the streaks alive, like some sort of social capital babysitter or surrogate.

If you and a friend Snap back and forth for consecutive days, you build up a streak which is tracked in your friends list. Young people quickly threw their heart and souls into building and maintaining streaks with their friends. This was literally proof of work as proof of friendship, quantified and tracked.

This clarifies Snapchat's strategy on the 3 axes of my social media framework: Snapchat intends to push out further on the utility axis at the expense of the social capital axis which, as we’ve noted before, is volatile ground to build a long-term business on.

A variant of this type of status devaluation cascade can be triggered when a particular group joins up. This is because the stability of a status lattice depends just as much on the composition of the network as its total size. A canonical example in tech was the youth migration out of Facebook when their parents signed on in force.

Fashion is one of the most interesting industries for having understood this recurring boom and bust pattern in network effects and taken ownership of its own status devaluation cycles. Some strange cabal of magazine editors and fashion designers decide each season to declare arbitrarily new styles the fashion of the moment, retiring previous recommendations before they grow stale. There is usually no real utility change at all; functionally, the shirt you buy this season doesn’t do anything the shirt you bought last season still can’t do equally well. The industry as a whole is simply pulling the frontier of scarcity forward like a wave we're all trying to surf.

Many types of social capital have qualities which render them fragile. Status relies on coordinated consensus to define the scarcity that determines its value. Consensus can shift in an instant.

I think network effects are great, but in a sense they’re a little overrated. The problem with network effects is they unwind just as fast. And so they’re great while they last, but when they reverse, they reverse viciously. Go ask the MySpace guys how their network effect is going. Network effects can create a very strong position, for obvious reasons. But in another sense, it’s a very weak position to be in. Because if it cracks, you just unravel. I always worry when a company thinks the answer is just network effects. How durable are they?

One of the common traps is the winner's curse for social media. If a social network achieves enough success, it grows to a size that requires the imposition of an algorithmic feed in order to maintain high signal-to-noise for most of its users. It's akin to the Fed trying to manage inflation by raising interest rates.

This isn’t to say that proof of work is bad. In fact, coming up with a constraint that unlocks the creativity of so many people is exactly how Status as a Service businesses achieve product-market fit. Constraints force the type of compression that often begets artistic elegance, and forcing creatives to grapple with a constraint can foster the type of focused exertion that totally unconstrained exploration fails to inspire.

Whatever the reason, TikTok's creator community is ultimately capped by the nature of its proof of work, no matter how ingenious its creative tools. The same is true of Twitter: the number of people who enjoy crafting witty 140 and now 280-character info nuggets is finite. Every network has some ceiling on its ultimate number of contributors, and it is often a direct function of its proof of work.Of course, the value and total user size of a network is not just a direct function of its contributor count. Whether you believe in the 1/9/90 rule of social networks or not, it’s directionally true that any network has value to people besides its creators. In fact, for almost every network, the number of lurkers far exceeds the number of active participants. Life may not be a spectator sport, but a lot of social media is.

The holy grail for social networks is to generate so much social capital and utility that it ends up in that desirable upper right quadrant of the 2x2 matrix. Most social networks will offer some mix of both, but none more so than WeChat.While I hear of people abandoning Facebook and never looking back, I can't think of anyone in China who has just gone cold turkey on WeChat. It's testament to how much of an embedded utility WeChat has become that to delete it would be a massive inconvenience for most citizens.

Come for the fame, stay for the tool?

Facebook, with its explicit attachment to the real world graph and its enforcement of a single public identity, is just a poor structural fit for the more complex social capital requirements of the young.

Add to that this younger generation's preference for and facility with visual communication and it's clearly why the preferred social network of the young is Instagram and the preferred messenger Snapchat, both preferable to Facebook. Instagram because of the ease of creating multiple accounts to match one's portfolio of identities, Snapchat for its best in class ease of visual messaging privately to particular recipients.

Incidentally, teens and twenty-somethings, more so than the middle-aged and elderly, tend to juggle more identities.

Young people look at so many of the status games of older folks—what brand of car is parked in your garage, what neighborhood can you afford to live in, how many levels below CEO are you in your org—and then look at apps like Vine and Musical.ly, and they choose the only real viable and thus optimal path before them. Remember the second tenet: people maximize their social capital the most efficient way possible. Both the young and old pursue optimal strategies.

While we're all status-seeking monkeys, young people tend to be the tip of the spear when it comes to catapulting new Status as a Service businesses, and may always will be. A brief aside here on why this tends to hold.One is that older people tend to have built up more stores of social capital. A job title, a spouse, maybe children, often a house or some piece of real estate, maybe a car, furniture that doesn't require you to assemble it on your own, a curriculum vitae, one or more college degrees, and so on.

Whatever the mechanisms, social networks must devote a lot of resources to market making between content and the right audience for that content so that users feel sufficient return on their work. Distribution is king, even when, or especially when it allocates social capital.

The same way many social networks track keystone metrics like time to X followers, they should track the ROI on posts for new users. It's likely a leading metric that governs retention or churn. It’s useful as an investor, or even as a curious onlooker to test a social networks by posting varied content from test accounts to gauge the efficiency and fairness of the distribution algorithm.

It's not that the existence of old money or old social capital dooms a social network to inevitable stagnation, but a social network should continue to prioritize distribution for the best content, whatever the definition of quality, regardless of the vintage of user producing it. Otherwise a form of social capital inequality sets in, and in the virtual world, where exit costs are much lower than in the real world, new users can easily leave for a new network where their work is more properly rewarded and where status mobility is higher.

graph-based social capital allocation mechanisms can suffer from runaway winner-take-all effects. In essence, some networks reward those who gain a lot of followers early on with so much added exposure that they continue to gain more followers than other users, regardless of whether they've earned it through the quality of their posts. One hypothesis on why social networks tend to lose heat at scale is that this type of old money can't be cleared out, and new money loses the incentive to play the game.

Young people, with their much higher usage rate on social media, are the most sensitive and attuned demographic to the payback period and ROI on their social media labor. So, for example, young people tend not to like Twitter but do enjoy Instagram.

If a person posts something interesting to a platform, how quickly do they gain likes and comments and reactions and followers? The second tenet is that people seek out the most efficient path to maximize their social capital. To do so, they must have a sense for how different strategies vary in effectiveness. Most humans seem to excel at this.

Thirst for status is potential energy. It is the lifeblood of a Status as a Service business. To succeed at carving out unique space in the market, social networks offer their own unique form of status token, earned through some distinctive proof of work.

It's critical that not everyone can quip with such skill. This gave Twitter its own proof of work, and over time the overall quality of tweets improved as that feedback loop spun and tightened. The strategies that gained the most likes were fed in increasing volume into people's timelines as everyone learned from and competed with each other.

Value is tied to scarcity, and scarcity on social networks derives from proof of work. Status isn't worth much if there's no skill and effort required to mine it. It's not that a social network that makes it easy for lots of users to perform well can't be a useful one, but competition for relative status still motivates humans.

It's true that as more people join a network, more social capital is up for grabs in the aggregate. However, in general, if you come to a social network later, unless you bring incredible exogenous social capital (Taylor Swift can join any social network on the planet and collect a massive following immediately), the competition for attention is going to be more intense than it was in the beginning. Everyone has more of an understanding of how the game works so the competition is stiffer.

If you've ever joined one of these social networks early enough, you know that, on a relative basis, getting ahead of others in terms of social capital (followers, likes, etc.) is easier in the early days. Some people who were featured on recommended follower lists in the early days of Twitter have follower counts in the 7-figures, just as early masters of Musical.ly and Vine were accumulated massive and compounding follower counts. The more people who follow you, the more followers you gain because of leaderboards and recommended follower algorithms and other such common discovery mechanisms.

How is a new social network analogous to an ICO? Each new social network issues a new form of social capital, a token.You must show proof of work to earn the token.Over time it becomes harder and harder to mine new tokens on each social network, creating built-in scarcity. Many people, especially older folks, scoff at both social networks and cryptocurrencies.

The creation of a successful status game is so mysterious that it often smacks of alchemy. For that reason, entrepreneurs who succeed in this space are thought of us a sort of shaman, perhaps because most investors are middle-aged white men who are already so high status they haven't the first idea why people would seek virtual status (more on that later).

I begin with these two observations of human nature because few would dispute them, yet I seldom see social networks, some of the largest and fastest-growing companies in the history of the world, analyzed on the dimension of status or social capital.

Let's begin with two principles:People are status-seeking monkeys*People seek out the most efficient path to maximizing social capital

Pragmatic Capitalism

For Bagehot, the Bank rate should be very high (that is, higher than the market rate) in order to incite banks to find liquidity first in the money market before asking for central bank liquidity, while Tooke advocated the “moderate rate” rule (that is, lower than the market rate) in order to mitigate the collapse of asset prices within financial markets, and to avoid a coordination problem within the market of funding liquidity.

“Lending freely against good collateral at a high rate” was not a doctrine that Walter Bagehot could have discovered in 1873 after decades of obscurantism. The directors of the Bank of England witnessed at the 1832 parliamentary inquiry how the Old Lady applied the policy of “lending liberally against acceptable collateral” during the 1825 crisis. The practice of lending at a high rate appeared under the Peel system from the 1847 crisis onwards. So, what appears as particular to Bagehot’s Lombard Street is the justification of the rule of a “very high” rate. Bagehot did not suggest a “penalty” rate (a term he did not use) so as to counter moral hazard, but a “very high” rate in order to force banks to exhaust market sources of liquidity before presenting at the Bank’s discount window. Like Henry Thornton and John Fullarton, Thomas Tooke was aware of the moral hazard problem and recommended banking supervision. Moreover, he suggested that the Bank rate should be set above the market rate in normal times – and not at a very high level in crisis times – so as to lean against the wind.

Salvador Ramos

But if you buy a new technology, you don’t know whether it is going to succeed, for example the Blu Ray. You didn’t know at that time which technology is going to dominate, which is going to be the industry standard, so people waited. You wait, and therefore it takes time for the product to succeed. Again, I’m talking on the industry level. Within the industry, some brands will grow faster than others. That’s fine, and then they might take a few years, less than 10 years to reach dominance in the market. But that’s not what we are talking about. It’s not about the brand’s market share. It’s out of the total market potential, how fast are you going to reach 50%? It’s not the market share of a specific brand, but the rate of growth of the market.

One of the things that we have managed to find out is the fact that innovation growth is slow. When somebody comes to you with a new product or a new innovation and that entrepreneur says it will capture 50% of the market in two years, that never happens. Usually when you think about very important innovations, say, CD players, MP3 players, if you think about the first market or one of the trials, either in North America, Europe or Southeast Asia, it takes [something] like 10 years to take 50% of the market.

So, those are the early adopters. They will adopt the early market in spite of the inherited risks of early innovation. The main market is not that forgiving. The main market wants the perfect product. So the early market might still be interested in how the product does in the technology itself. The main market is interested only in the functionality. If it functions well, they will buy it. If not, they will not.

What happened between 1870 and 1940, he argues, and I would agree, is what real transformation looks like. Any claims about current progress need to be compared with that baseline to see how they measure up.

Meanwhile, backbreaking toil both in the workplace and in the home was for the most part replaced by far less onerous employment. This is a point all too often missed by economists, who tend to think only about how much purchasing power people have, not about what they have to do to get it, and Gordon does an important service by reminding us that the conditions under which men and women labor are as important as the amount they get paid.Image